UNIVERSITY  OF  CALIFORNIA 
AT    LOS  ANGELES 


NEGOTIABLE  INSTRUMENTS 


Prepared  for  the  American  Institute  of  Banking 

By  SAMUEL  WILLISTON,  LL.D. 
Weld  Professor  of  Law  in  Harvard  Law  School 


American  Institute  of  Banking 

Five  Nassau  Street  New  York  City 


Copyright  1915 

by 

American  Institute  of  Banking 


>- 
as 

< 

CO 


CONTENTS 


Chapter  Page 

I.  Introduction    to    a    Study    of   the    Negotiable 

Instruments    Law    5 

II.  Negotiable  Instruments  in  General 15 

III.  Bills  of  Exchange 208 

IV.  Promissory  Notes  and  Checks 237 

V.  General  Provisions  of  the  Law 244 

VI.  Supplementary  Topics 247 

VII.  State  and  Territorial  Section  Numbers 254 

VIII.  Practical  Exercises 266^ 


38637: 


NEGOTIABLE  INSTRUMENTS 


CHAPTER  I 

introduction  to  a  Study  of  the  Negotiable 
Instruments  Law 

THE  LAW  OF  NEGOTIABLE  INSTRU- 
MENTS has  been  codified  in  most  States  by 
a  statute  known  as  the  Negotiable  Instru- 
ments Law.  Prior  to  the  enactment  of  this  statute, 
and  still  in  the  few  jurisdictions  of  the  United  States 
where  the  Negotiable  Instruments  Law  has  not  been 
passed,  the  law  governing  bills,  notes  and  checks,  is 
based  on  the  Common  Law;  that  is,  on  a  series  of 
rules  gradually  built  up  during  the  past  centuries  in 
England  and  the  United  States  from  the  decisions 
of  courts  on  various  questions  as  they  arose  from 
time  to  time.  Even  in  jurisdictions  where  the  Ne- 
gotiable Instruments  Law  has  been  enacted  the 
common  law  is  still  important  in  determining  con- 
troversies on  negotiable  instruments.  It  is  impor-,i 
tant  in  the  first  place  as  aiding  the  interpretation  of 
the  language  of  the  Negotiable  Instruments  Law. 
Unless  that  language  clearly  requires  a  different 
construction,  courts  presume  that  the  statute  re- 
states the  rule  of  the  common  law  which  existed 
prior  to  the  enactment  of  the  statute.    In  the  second 

5 


6  NEGOTIABLE  INSTRUMENTS 

place,  the  common  law  is  still  important  because 
cases  not  infrequently  arise  which  are  not  clearly 
covered  by  the  statute,  and  section  196  of  the  statute 
enacts  that  cases  not  provided  for  in  the  statute  shall 
be  governed  by  the  unwritten  law  previously  exist- 
ing. That  portion  of  the  common  law  which  relates 
to  negotiable  instruments  and  to  certain  other  mer- 
cantile transactions  is  frequently  called  the  "Law 
Merchant." 

2.  THE  NEGOTIABLE  INSTRUMENTS 
ACT. — The  Negotiable  Instruments  Law  is  based 
upon  an  earlier  English  statute,  called  the  "Bills  of 
Exchange  Act,"  which  codified  the  law  of  England 
governing  negotiable  instruments,  and  was  enacted 
in  1882.  As  the  Common  Law  of  England  upon 
this  subject  was  in  the  main  like  that  of  the  United 
States,  the  English  statute  furnished  great  aid  in 
codifying  the  American  law.  Most  of  the  States  of 
America  have  appointed  commissioners  to  promote 
uniformity  in  the  laws  of  the  several  States.  These 
commissioners  meet  annually  in  conference  and  in 
1895  undertook  the  draft  of  the  American  Nego- 
tiable Instruments  Law.  The  following  year  the 
draft  was  discussed  by  the  Conference  and  recom- 
mended for  adoption  by  the  several  States.  The 
law  thus  drafted  has  been  adopted  in  most  of  the 
United  States.  The  following  list  shows  the  States 
and  territories  in  which  the  law  has  been  adopted, 
with  the  date  of  enactment,  and  also  the  States  and 
territories  that  have  not  yet  adopted  such  law: 


NEGOTIABLE  INSTRUMENTS 


District  of  Columbia  (1899) 
Florida  (1897) 
Georgia  (not  enacted) 
Hawaii  (1907) 
Idaho  (1903) 
Illinois  (1907) 
Indiana  (1913) 
Iowa  (1902) 
Kansas  (1905) 
Kentucky  (1904) 
Louisiana  (1904) 
Maine  (not  enacted) 
Maryland  (1898) 
Massachusetts   (1898) 
Michigan  (1905) 
Minnesota  (1913 
Mississippi  (1916) 
Missouri  (1905) 
Alabama  (1907) 
Alaska  (1913) 
Arizona  (1901) 
Arkansas  (1913) 
California  (not  enacted) 
Colorado  (1897) 
Connecticut  (1897) 
Delaware  (1911) 


Montana  (1903) 
Nebraska  (1905) 
Nevada  (1907) 
New  Hampshire  (1909) 
New  Jersey  (1902) 
New  Mexico  (1907) 
New  York  (1897) 
North  Carolina  (1899) 
North  Dakota  (1899) 
Ohio  (1902) 
Oklahoma  (1909) 
Oregon  (1899) 
Pennsylvania  (1901) 
Porto  Rico  (not  enacted) 
Rhode  Island  (1898) 
South  Carolina  (1914) 
South  Dakota  (1913) 
Tennessee  (1899) 
Texas  (not  enacted) 
Utah  (1899) 
Vermont  (1913) 
Virginia  (1898) 
Washington  (1899) 
West  Virginia  (1907) 
Wisconsin  (1899) 
Wyoming  (1905) 


3.  AMENDMENTS  AND  VARIATIONS.— In 
a  few  States  the  Negotiable  Instruments  Law  has 
been  somewhat  amended.  All  important  amend- 
ments are  indicated  by  notes  following  the  several 
sections  of  the  Act.  Unfortunately  in  the  statute 
as  passed  in  the  several  States  the  section  number- 
ing adopted  by  the  Commissioners  of  Uniform  Laws 
has  not  always  been  followed.  The  references  in 
this  book  are  to  the  numbers  adopted  by  these  com- 
missioners. Those  States  that  have  adopted  differ- 
ent section  numbering  are  indicated  by  a  table  of 


8  NEGOTIABLE  INSTRUMENTS 

cross  references  at  the  end  of  the  book.  As  the 
Negotiable  Instruments  Law,  even  in  the  few  pas- 
sages where  its  terms  are  not  wholly  clear  or  satis- 
factory, is  the  ultimate  authority  on  the  subject,  it 
is  necessary  to  be  familiar  with  its  language  and 
arrangement.  Each  section  of  the  Act  should  be 
read  carefully  and  the  comment  and  illustrations 
following  the  sections  will  make  the  meaning  and 
application  plainer.  But  before  the  Act  is  studied, 
a  few  fundamental  principles  in  regard  to  negotia- 
ble instruments  should  be  understood. 

4.  A  NEGOTIABLE  INSTRUMENT  IS  A 
CONTRACT  OR  A  SET  OF  CONTRACTS.— A 
negotiable  instrument  is  a  contract  or  a  collection 
of  contracts.  An  unindorsed  promissory  note  is  a 
single  contract — a  contract  of  the  maker  with  the 
payee.  So  an  unaccepted  and  unindorsed  check  or 
bill  of  exchange  is  simply  a  contract  of  the  drawer 
with  the  payee.  When  these  instruments  are  en- 
dorsed, or  when  a  bill  of  exchange  is  accepted,  an 
additional  contract  is  created.  The  study  of  the 
law  governing  negotiable  instruments  aims  to 
acquire  a  knowledge  of  the  terms  and  legal  effect 
of  the  various  obligations  which  may  thus  arise  on 
negotiable  paper. 

5.  THE  CONTRACTS  ON  NEGOTIABLE 
INSTRUMENTS  ARE  FORMAL  CONTRACTS. 
— To  understand  the  law  of  negotiable  instruments 
some  elementary  knowledge  of  the  law  of  contracts 
is  desirable.    Contracts  may  be  divided  into  simple 


NEGOTIABLE   INSTRUMENTS  9 

contracts  and  formal  contracts.  Simple  contracts 
owe  their  validity  to  mutual  assent  of  the  parties,  to 
the  terms  of  a  promise,  or  set  of  promises  for  which 
the  promisee  gives  consideration.  The  typical  for- 
mal contract  of  English  and  American  law  has  been 
the  contract  under  seal  which  was  enf  orcible  though 
no  consideration  was  paid  for  it.  For  a  detailed 
statement  of  what  this  implies,  reference  must  be 
made  to  the  volume  dealing  with  business  law  gen- 
erally. Formal  contracts  depend  for  their  validity 
on  the  form  in  which  they  are  made.  The  con- 
tracts on  negotiable  instruments  partake  of  the 
nature  of  simple  contracts  in  requiring  considera- 
tion for  their  validity  but  they  also  partake  of  the 
nature  of  formal  contracts.  No  instrument  and  no 
contract  on  an  instrument  which  does  not  comply 
with  certain  rules  as  to  form  is  negotiable.  More- 
over, the  instrument  itself  is  regarded  as  the  obli- 
gation, not  simply  as  evidence  of  it. 

6.  THE  TERMS  OF  THE  CONTRACTS  ON 
NEGOTIABLE  INSTRUMENTS  ARE  LARGE- 
LY IMPLIED. — In  an  ordinary  written  contract 
the  parties  write  out  fully  the  terms  of  their  agree- 
ment, but  where  the  customs  of  business  lead  men 
to  enter  constantly  into  contracts  of  the  same  sort, 
abbreviated  statements  of  the  terms  of  their  con- 
tracts are  likely  to  be  employed.  Thirty  days,  for  in- 
stance, may  be  used  in  a  contract  for  the  sale  of 
goods  to  mean  that  the  price  of  goods  sold  is  not 
due  for  thirty  days,  and  a  variety  of  illustrations 


10  NEGOTIABLE   INSTRUMENTS 

might  easily  be  given  of  abbreviated  mercantile 
memoranda  in  contracts.  So  in  bills  of  exchange 
and  promissory  notes — the  terms  of  the  contract 
are  not  fully  expressed.  The  contract  between  the 
maker  and  payee  of  a  promissory  note  is  indeed 
stated  with  some  fullness,  but  the  contract  of  a 
drawer  of  a  bill  of  exchange  or  of  a  check  is  not 
stated.  In  form  such  a  document  is  merely  an  order 
on  another  to  pay  a  certain  sum  of  money,  but  by 
mercantile  custom  it  is  also  in  legal  effect  an  abbre- 
viated promise  that  "If  the  drawee  fails  to  pay  on 
demand  at  maturity,  and  I  am  promptly  notified  of 
his  failure,  I  will  pay."  The  contract  of  an  endorser 
is  similarly  to  be  understood  from  mercantile  cus- 
tom not  because  of  express  language  used.  It  is  pos- 
sible to  write  on  negotiable  instruments  contracts 
other  than  those  made  negotiable  by  custom  of  mer- 
chants. Thus  a  guaranty  may  be  written  on  a  bill 
or  note,  but  its  effect  must  be  judged  as  a  simple 
contract,  as  if  it  were  on  a  separate  paper. 

7.  WHAT  IS  MEANT  BY  NEGOTIABLE.— 
Contracts  in  our  law  may  generally  be  assigned  so 
that  the  assignee  stands  in  the  same  position  as  the 
assignor.  This  is  not  true  of  all  contracts,  but  it  is 
the  general  rule.  It  would  be  true  of  any  promise 
to  pay  money,  even  though  it  were  not  negotiable. 
What  then  is  the  importance  of  an  instrument  be- 
ing negotiable?  It  is  mainly  this:  that  the  negotia- 
tion of  a  negotiable  instrument  to  a  holder  in  due 
course  does  not  merely  give  the  holder  the  rights 


NEGOTIABLE  INSTRUMENTS  11 

of  the  original  promisee,  it  gives  him  those  rights 
free  from  any  personal  or  equitable  defence  which 
might  defeat  them ;  or,  as  it  is  often  briefly  put,  ne- 
gotiation cuts  off  equities.  This  requires  a  brief 
definition  of  what  is  meant  by  an  equity,  an  equit- 
able defence,  or  a  personal  defence,  for  all  these' 
terms  mean  the  same  thing. 

8.  ABSOLUTE  AND  PERSONAL  DE- 
FENCES.— The  law  distinguishes  between  a  situa- 
tion where  there  is  only  apparently  but  not  really 
a  negotiable  obligation,  and  a  case  where  there  is 
an  actual  negotiable  obligation  but  for  some  rea- 
son in  justice  it  should  not  be  enforced.  If  the  sig- 
nature of  a  maker  to  a  negotiable  instrument  is 
forged,  though  he  has  apparently  entered  into  a 
negotiable  obligation,  in  fact  he  has  not.  If,  how- 
ever, he  has  been  induced  by  fraudulent  misstate- 
ments to  sign  such  an  instrument,  he  has  actually 
entered  into  a  negotiable  obligation,  though  it  is 
unjust  to  enforce  it  in  favor  of  the  fraudulent  payee. 
On  the  forged  note  nobody  could  recover  against 
the  apparent  maker.  On  the  fraudulent  note  the 
payee  could  not  recover,  but  a  holder  in  due  course 
could.  It  may  then  be  said  that  forgery  is  an  abso- 
lute or  real  defence  while  such  fraud  as  that  given 
in  the  illustration  is  a  personal  or  equitable  defence, 
or,  briefly,  an  equity.  No  equitable  defence  is  avail- 
able against  a  holder  in  due  course.  That  is,  one 
who  has  paid  value  for  the  instrument  before  ma- 
turity in  good  faith  without  notice  of  the  defence. 


12  NEGOTIABLE  INSTRUMENTS 

This  distinction  between  absolute  or  real  defences 
on  the  one  hand  and  personal  defences  or  equities  on 
the  other  hand,  is  fundamental  in  the  law  of  nego- 
tiable instruments,  and  it  is  essential  to  remember 
which  defences  fall  under  these  headings. 
/  9.  WHAT  ARE  REAL  AND  WHAT  ARE 
PERSONAL  DEFENCES.— The  following  de- 
fences to  an  obligation  are  absolute  or  real: 

First — The  lack  of  genuineness  of  the  signature. 
This  may  be  due  to  forgery  or  it  may  be  due  to  lack 
of  authority  on  the  part  of  an  agent  who  made  the 
signature  on  behalf  of  another. 

Second — Fraud  of  some  kinds. 

Third — Lack  of  title,  as  where  a  holder  claims 
through  a  forged  endorsement. 

Fourth — Bankruptcy  of  the  holder. 

Fifth — Material  alteration  of  the  instrument. 

Sixth — Legal  incapacity  as  of  a  minor,  an  insane 
person,  and  in  some  jurisdictions — as  to  some  mat- 
ters— a  married  woman. 

Seventh — Illegality  of  certain  kinds. 

Eighth — The  legal  discharge  of  the  instrument 
or  the  obligation  in  question. 

The  following  are  personal  defences,  or  equities 
only,  and  are  not  available  against  a  holder  in 
due  course: 

First — Illegality  of  certain  kinds. 

Second — Fraud  generally. 

Third — Duress. 

Fourth — Lack  of  delivery  of  the  instrument. 


NEGOTIABLE  INSTRUMENTS  13 

Fifth — Lack  of  consideration. 

Sixth — Failure  of  consideration. 

Seventh — Discharge  of  the  instrument  before 
maturity. 

Eighth — A  surety  is  discharged  by  certain  deal- 
ings with  his  principal  which  are  prejudicial  to  him. 

Ninth— Set-off. 

The  meaning  of  these  various  defences  will  not 
be  understood  without  the  explanation  of  them 
hereafter  given,  but  a  list  of  them  seems  desirable 
in  this  place  as  a  summary. 

There  may  be  a  defence  to  one  obligation  on  a 
negotiable  instrument  and  no  defence  to  another. 
Sometimes  all  the  obligations  on  an  instrument  are 
subject  to  the  same  defence,  as  where  the  instru- 
ment is  materially  altered  after  all  the  signatures 
have  been  put  upon  it.  Sometimes  there  may  be  a 
defence  of  one  kind  to  one  obligation  on  the  instru- 
ment, and  a  defence  of  another  kind  to  another 
obligation.  The  obligation  of  each  person  whose 
name  appears  on  the  instrument  frequently  must  be 
considered  separately. 

10.  WHAT  A  STUDY  OF  THE  NEGOTIA- 
BLE INSTRUMENTS  LAW  INCLUDES— The 
chief  provisions  of  the  Negotiable  Instruments  Law 
may  be  classified  under  the  following  headings: 

First— What  is  essential  for  the  formation  of  a 
negotiable  instrument  or  for  a  negotiable  obliga- 
tion on  such  an  instrument? 

Second — What  is  the  full  meaning  of  each  con- 


14  NEGOTIABLE  INSTRUMENTS 

tract  which  is  briefly  stated  on  such  an  instrument. 
That  is,  what  does  a  maker,  drawer,  acceptor,  en- 
dorser in  legal  effect  promise  to  do? 

Third — What  are  che  absolute  and  what  the  per- 
sonal defences  which  may  excuse  a  promisor  from 
performing  his  promise? 

Fourth — Who  is  a  holder  in  due  course,  and 
therefore  not  subject  to  personal  defences  or  equi- 
ties? 

With  this  introduction  we  may  take  up  the  ex- 
amination of  the  language  of  the  act,  with  appro- 
priate explanation  and  illustration,  of  the  several 
sections.  The  meaning  of  some  is  plain  enough 
without  comment.  Others,  though  perhaps  plain  to 
a  lawyer,  assume  a  general  knowledge  of  law  and 
legal  phraseology  which  one  who  is  not  a  lawyer 
cannot  be  expected  to  possess. 


CHAPTER  II 


Title  I  of  the  Negotiable  Instruments  Law 


NEGOTIABLE  INSTRUMENTS  IN  GENERAL 


Article  I — Form  and  Interpretation 

12.  SECTION  1.— [FORM  OF  NEGOTIABLE 
INSTRUMENT].— An  instrument  to  be  negotia- 
ble must  conform  to  the  following  requirements: 
(1)  It  must  be  in  writing  and  signed  by  the  maker 
or  drawer;  (2)  Must  contain  an  unconditional 
promise  or  order  to  pay  a  sum  certain  in  money; 
(3)  Must  be  payable  on  demand,  or  at  a  fixed  or 
determinable  future  time;  (4)  Must  be  payable  to 
order  or  to  bearer,  and  (5)  Where  the  instrument 
is  addressed  to  a  drawee,  he  must  be  named  or 
otherwise  indicated  therein  with  reasonable  cer- 
tainty. 

NOTE. — In  the  Wisconsin  Act  the  following  is  added: 
"But  no  order  drawn  upon  or  accepted  by  the  treasurer  of 
any  county,  town,  city,  village  or  school  district,  whether 
drawn  by  an  officer  thereof  or  any  other  person,  and  no  ob- 
ligation nor  instrument  made  by  any  such  corporatioin  or 
any  officer  thereof,  unless  expressly  authorized  by  law  to  be 
made  negotiable,  shall,  or  shall  be  deemed  to  be  negotiable, 
according  to  the  custom  of  merchants,  in  whatever  form 
they  may  be  drawn  or  made.  Warehouse  receipts,  bills  of 
lading  and  railroad  receipts  upon  the  face  of  which  the 
words  'not  negotiable'  shall  not  be  plainly  written,  printed 
or  stamped,  shall  be  negotiable  as  provided  in  section  1676 
of  the  Wisconsin  Statutes  of  1878,  and  in  sections  4194  and 
4425  of  these  statutes,  as  the  same  have  been  construed  by 
the  Supreme  Court." 

15 


16  NEGOTIABLE   INSTRUMENTS 

13.  THE  INSTRUMENT  MUST  BE  WRIT- 
TEN AND  SIGNED  AND  MAY  BE  SEALED.— 
The  first  section  of  the  statute  states  briefly  the 
requisites  of  a  negotiable  instrument.  The  follow- 
ing sections  elaborate  some  of  the  requirements 
here  enumerated.  Let  us  run  over  these.  "It  must 
be  in  writing  and  signed  by  the  maker  or  drawer." 
That  is  simple.  It  may  be  written  in  pencil  so  far 
as  its  legal  validity  is  concerned,  and  the  substance 
upon  which  it  must  be  written  makes  no  difference, 
but  it  must  be  written  and  signed.  "Signed"  does 
not  necessarily  mean  subscribed  at  the  end  of  the 
paper,  though  that  is  the  usual  and  proper  method 
of  signing.  "John  Smith  promises  to  pay  one  hun- 
dred dollars  to  Thomas  Brown  or  order"  is  a  pro- 
missory note  if  the  name  of  John  Smith  was  written 
by  him  with  intent  to  authenticate  the  instrument. 

14.  THE  INSTRUMENT  MUST  CONTAIN 
AN  UNCONDITIONAL  ORDER  OR  PROM- 
ISE.— The  second  requisite  is,  "It  must  contain  an 
unconditional  promise  or  order  to  pay  a  sum  certain 
in  money."  That  is  not  so  simple.  The  words  "un- 
condi  onal  promise"  refer  to  promissory  notes;  the 
requirement  of  an  unconditional  order  relates  to 
bills  of  exchange  or  checks.  Suppose  a  draft  in  this 
form :  an  order  on  the  drawee  to  pay  a  specified  sum 
on  a  fixed  day  adding  "charge  the  same  to  the  $1,800 
account."  Is  that  unconditional?  Yes,  but  com- 
pare with  it  the  same  case  slightly  changed:  an 
order  to  pay  on  a  fixed  day  "out  of  the  $1,800  due 


NEGOTIABLE  INSTRUMENTS  17 

me."  That  last  form  is  not  an  unconditional  order 
because  by  its  terms  the  order  depends  on  there 
being  $1,800  due  the  drawer.  If  there  is  nothing 
due  him,  nothing  would  be  payable  under  the  terms 
of  the  order.  But  in  the  instrument  as  we  stated  it 
at  first  there  was  an  order  to  pay  and  then  a  request 
to  charge  to  a  special  account.  (See  Section  3.) 
There  is  one  form  of  instrument  which  under  the 
statute  is  an  unconditional  order  though  it  might 
not  seem  to  be.  Making  an  instrument  payable  at 
a  bank  is  an  order  on  the  bank  to  pay  the  instru- 
ment, and  makes  it  in  effect  a  bill  of  exchange 
drawn  on  the  bank.     (Section  87.) 

15.  ASSIGNMENT  OF  CLAIM  IS  NOT  A 
BILL  OF  EXCHANGE.— Sometimes  we  see  an 
instrument  in  the  form  of  an  assignment  by  a  credi- 
tor of  a  claim  which  he  has  against  a  debtor 
accompanied  by  an  order  to  pay  the  claim  so 
assigned  to  a  certain  payee  or  assignee.  That  is  not 
a  bill  of  exchange,  even  though  the  words  "order" 
or  "bearer"  are  inserted,  because  it  is  an  assignment 
of  a  particular  claim.  If  the  claim  is  not  good  then 
the  drawer  does  not  demand  payment;  he  onl"  /de- 
mands payment  of  the  claim  which  he  has  agamst 
the  drawee.  The  order  is  therefore  conditional  on 
his  having  a  claim.  On  the  other  hand,  if  the  order 
is  unconditional  it  is  immaterial,  so  far  as  the  nego- 
tiability of  the  draft  is  concerned,  that  the  drawer 
has  no  valid  claim  against  the  drawee  and  no  right 
to  draw  on  him.     A  check  on  a  bank  where  the 


18  NEGOTIABLE  INSTRUMENTS 

drawer  has  no  funds  is  as  much  a  negotiable  instru- 
ment as  if  he  had  funds,  because  the  drawer  does 
make  an  unconditional  demand  or  order  upon  the 
bank.  The  promise  in  a  note  must  be  as  uncondi- 
tional as  the  order  in  a  draft.  It  will  not  do  to  say, 
i*T  promise  to  pay  the  money  in  a  certain  event,  or 
unless  a  certain  event  happens." 

16.  A  NEGOTIABLE  INSTRUMENT  MUST 
BE  FOR  A  SUM  CERTAIN  IN  MONEY.— An- 
other requirement  of  negotiability  stated  in  sub- 
section 2  is  that  the  instrument  must  be  for  "a  sum 
certain  in  money."  That  involves  a  consideration 
both  of  what  is  money  and  what  is  a  sum  certain. 
What  is  meant  by  a  sum  certain  is  partly  defined  in 
section  6,  subsection  5,  to  which  reference  is  made. 
The  meaning  of  money  as  used  in  the  law  is  ordi- 
narily legal  tender  and  except  so  far  as  section  6 
modifies  this  rule  of  the  Common  Law,  a  negotiable 
instrument  must  be  payable  in  legal  tender.  It  will 
in  effect  be  so  payable  if  the  instrument  simply 
promises  a  stated  sum  of  money,  without  stating  in 
what  medium  the  sum  is  to  be  paid ;  but  a  promise 
to  pay  in  bank  notes  is  not  a  promise  to  pay  legal 
tender.  Whether  an  instrument  so  payable  may  be 
negotiable  is  discussed  under  section  6. 

17.  THE  INSTRUMENT  MUST  BE  CER- 
TAIN IN  TIME  OF  MATURITY.— The  third 
subsection  provides  that  the  instrument  "must  be 
payable  on  demand  or  at  a  fixed  or  determinable 
future  time."     Generally,  instruments  are  payable 


NEGOTIABLE  INSTRUMENTS  19 

either  at  a  fixed  time  or  on  demand,  but  sometimes 
bills  of  exchange  are  payable  a  fixed  number  of  days 
after  sight.  When  such  a  bill  will  become  due  is 
not  fixed  when  the  instrument  is  issued,  but  it  can 
be  fixed  by  presenting  the  instrument  and  starting 
the  days  to  run.  You  cannot  tell  when  you  look  at 
the  instrument  just  how  soon  it  will  be  due,  but  the 
holder  can  make  it  become  due  within  the  given 
number  of  days  after  sight  by  formally  presenting 
the  instrument.  The  time  is  therefore  determin- 
able. Section  4  of  the  Law  further  defines  what  is 
meant  in  section  1  by  "a  fixed  or  determinable  fu- 
ture time." 

18.  WORDS  OF  NEGOTIABILITY  ARE 
NECESSARY. — Subsection  4  provides  that  the  in- 
strument "must  be  payable  to  order  or  to  bearer." 
It  does  not  matter  whether  the  instrument  reads  "to 
the  order  of  A"  or  "to  A  or  order."  Legally  those 
mean  the  same  thing.  It  may  be  to  the  order  of 
two  or  more  jointly  or  to  the  order  of  any  one  or 
more  of  several.  It  may  be  to  the  order  of  the 
holder  of  an  office  for  the  time  being  (Section  8).  It 
does  not  matter  whether  it  is  simply  "to  bearer"  or, 
whether  it  is  to  "A  or  bearer."  The  definition  of 
an  instrument  payable  to  bearer  is  further  enlarged 
by  section  9.  To  illustrate  what  has  been  said,  that 
the  obligations  of  the  different  parties  to  a  nego- 
tiable instrument  are  separate  contracts,  we  may 
suppose  the  case  of  a  note,  non-negotiable  because 
of  the  omission  of  the  words  "order"  or  "bearer" 


20  NEGOTIABLE  INSTRUMENTS 

but  indorsed  by  the  payee  in  terms  "to  the  order  of" 
an  indorser.  The  payee's  indorsement  is  a  nego- 
tiable contract,  though  the  contract  of  the  maker  of 
the  note  is  not. 

19.  THE  DRAWEE  MUST  BE  INDICATED. 
' — Finally  the  last  subsection  of  section  1  provides 

that  the  instrument,  if  a  bill  of  exchange,  must  be 
addressed  to  a  drawee  indicated  with  reasonable 
certainty.  But  it  may  be  addressed  to  two  or  more 
persons  as  joint  drawees.  (Section  128.)  If  the 
drawer  and  drawee  of  a  bill  are  the  same  person, 
the  instrument  is  in  legal  effect  a  promissory  note 
and  may  be  treated  either  as  a  bill  or  note.  (Sec- 
tion 130.)  There  may  also  be  in  a  bill  a  kind  of 
subsidiary  drawee,  called  a  referee  in  case  of  need. 
If  the  drawee  does  not  pay,  the  holder  of  the  bill 
may  call  upon  this  referee.    (Section  131.) 

20.  SECTION  2.— [CERTAINTY  AS  TO 
SUM;  WHAT  CONSTITUTES.]  The  sum  pay- 
able is  a  sum  certain  within  the  meaning  of  this  act, 
although  it  is  to  be  paid:  (1)  With  interest;  or  (2) 
By  stated  instalments;  or  (3)  By  stated  instal- 
ments, with  a  provision  that  upon  default  in  pay- 
ment of  any  instalment  or  of  interest,  the  whole 
shall  become  due;  or  (4)  With  exchange,  whether 
at  a  fixed  rate  or  at  the  current  rate;  or  (5)  With 
costs  of  collection  or  an  attorney's  fee,  in  case  pay- 
ment shall  not  be  made  at  maturity. 

NOTE. — In  the  Acts  of  Idaho,  Iowa  and  North  Carolina, 
the  words,  "Or  of  interest"  are  omitted  from  Subsection 
(3).  In  Nebraska,  North  Carolina  and  South  Dakota,  there 
are  provisions  that  nothing  in  the  Act  shall  be  construed 
as  authorizing  the  enforcement  of  a  stipulation  for  at- 
torney's fees. 


NEGOTIABLE   INSTRUMENTS  21 

21.  WHAT  IS  A  SUM  CERTAIN.— We  have 
considered  what  is  meant  by  money.  What  is 
meant  by  a  "sum  certain"  is  defined  in  section  2  to 
some  extent.  The  first  two  subsections  state  what 
would  without  any  statut^  have  been  obvious.  As 
the  rate  of  interest  is  fixed  by  the  instrument  the 
exact  sum  which  will  be  due  at  maturity  can  be  cal- 
culated by  any  one  at  any  time.  And  the  sum  is 
equally  definitely  fixed  though  payable  in  instal- 
ments. The  third  subsection  is  not  quite  so  clear. 
It  may  be  thought  that  if  such  an  instrument  is 
open  to  any  objection,  it  is  rather  open  to  the  objec- 
tion that  it  is  not  payable  at  a  fixed  time,  (for,  as  we 
shall  see,  that  also  is  one  of  the  requisites  of  nego- 
tiability), than  to  uncertainty  of  the  amount.  But  a 
change  in  time  of  maturity  will  also  involve  a 
change  in  the  amount  due  at  maturity.  However, 
the  statute  solves  our  difficulty.  The  sum  is  cer- 
tain within  the  meaning  of  the  statute  though  the 
instrument  is  payable  with  exchange,  either  at  a 
fixed  rate  or  at  the  current  rate.  It  is  certain  though 
payable  with  the  cost  of  collection,  or  with  an  at- 
torney's fee  if  payment  is  not  made  at  maturity.  In 
these  cases  the  sum  is  not  really  certain,  but  the  net 
recovery  which  the  holder  v/ill  realize  is  certain,  and 
that  has  been  thought  sufficient ;  but  a  provision  in  a 
note  that  it  shall  be  subject  to  the  payment  of  an 
attorney's  fee  when  the  note  is  unpaid  and  placed  in 
the  hands  of  an  attorney  for  collection,  whether  the 
note  is  then  due  or  not,  is  not  within  the  protection 


22  NEGOTIABLE  INSTRUMENTS 

of  the  statute  and  would  not  be  negotiable,  since 
the  sum  is  made  uncertain. 

22.  ATTORNEY'S  FEES.— The  provisions  of 
the  statute  in  regard  to  attorney's  fees  has  not  alto- 
gether set  at  rest,  however,  a  conflict  of  authority 
^which  existed  prior  to  the  passage  of  the  Negotiable 
Instruments  Law.  Before  the  passage  of  that  stat- 
ute four  views  were  taken  by  different  courts:  (1) 
that  the  contract  for  attorney's  fees  was  valid  and 
the  instrument  was  negotiable;  (2)  that  the  provi- 
sion was  a  valid  simple  contract  between  the  parties 
but  destroyed  negotiability  of  the  instrument;  (3) 
that  the  provision  was  void  and  contrary  to  public 
policy,  but  being  void  did  not  affect  negotiability; 
(4)  that  the  usury  laws  prevented  any  fee  which 
would  make  the  total  charge  over  and  above  the 
face  of  the  note  exceed  the  highest  rate  of  interest 
allowed  by  the  statute.  The  Negotiable  Instru- 
ments Law  makes  it  clear,  where  it  is  enacted,  that 
the  provision  does  not  destroy  negotiability,  but 
whether  the  effect  of  the  statute  by  implication  is  to 
make  valid  a  provision  which  previously  was  void 
has  been  the  subject  of  conflicting  decisions.  In 
Ohio  and  West  Virginia,  the  Supreme  Courts  have 
held  that  the  provision  is  void,  though  the  note  :^ 
negotiable.  A  contrary  view  has  been  taken  by  the 
Supreme  Courts  of  Colorado  and  Virginia,  that  is 
that  the  provision  is  valid  and  the  note  negotiable. 
In  Nebraska,  North  Carolina  and  South  Dakota,  the 
statute  itself  contains  provisions  that  the  act  shall 


NEGOTIABLE  INSTRUMENTS  23 

not  be  construed  as  making  valid  a  stipulation  for 
attorney's  fees. 

23.  SECTION  3.— [WHEN  PROMISE  IS  UN- 
CONDITIONAL.] An  unqualified  order  or  prom- 
ise to  pay  is  unconditional  within  the  meaning  of 
this  act,  though  coupled  with:  (1)  An  indication  of 
a  particular  fund  out  of  which  reimbursement  is  to 
be  made,  or  a  particular  account  to  be  debited  with 
the  amount;  or  (2)  A  statement  of  the  transaction 
which  gives  rise  to  the  instrument.  But  an  order  or 
promise  to  pay  out  of  a  particular  fund  is  not  un- 
conditional. 

24.  INDICATION  OF  A  PARTICULAR 
FUND  IS  UNOBJECTIONABLE.— We  have  seen 
that  a  promise  or  order  to  pay  which  is  dependent 
on  the  existence  or  sufficiency  of  a  fund  or  credit 
cannot  be  negotiable,  but  a  statement  of  the  fund  or 
account  to  which  the  payment  is  to  be  charged  is 
not  objectionable  for  the  sum  is  to  be  paid  irrespect- 
ive of  whether  the  fund  or  credit  is  sufficient  to  meet 
the  charge. 

25.  STATEMENT  OF  THE  TRANSACTION 
GIVING  RISE  TO  THE  INSTRUMENT.— One 
matter  in  regard  to  the  unconditional  quality  of  the 
promise  required  in  a  note  may  be  worth  mention- 
ing. It  is  provided  in  section  3  (2)  that  it  does  not 
make  an  instrument  non-negotiable  if  it  contains  a 
statement  of  the  transaction  which  gave  rise  to  the 
instrument.  Suppose  this  case:  a  note  in  ordinary 
form  adds  these  words,  "This  note  was  given  for  a 
horse,  the  title  to  v/hich  is  to  remain  in  the  seller 


24  NEGOTIABLE  INSTRUMENTS 

until  this  note  is  paid."  The  Massachusetts  court 
and  some  other  courts  held,  before  the  passage  of 
the  Negotiable  Instruments  Law,  that  that  note 
was  not  negotiable,  on  the  ground  that  if  the  horse 
should  die  the  maker  of  the  note  would  not  have  to 
pay  it,  since  there  would  be  what  is  called  "failure 
of  consideration,"  for  the  note  when  the  horse  for 
which  it  was  given  died,  and  any  purchaser  of  the 
note  would  have  notice  from  its  terms  of  this  possi- 
bility. Other  courts  held  that  the  buyer  of  a  horse 
under  those  circumstances  would  have  to  pay  the 
price  even  though  the  horse  died.  The  Massachu- 
setts court  under  its  view  held  such  a  note  non- 
negotiable,  since  in  effect  it  was  conditional;  the 
other  courts  held  it  was  unconditional  and  negotia- 
ble, and  it  looks  as  if  the  same  controversy  might 
arise  under  the  present  act.  There  certainly  is  no 
harm  in  stating  the  transaction  which  gave  rise  to 
the  instrument  if  nothing  further  is  added,  that  is,  it 
will  do  to  say,  "This  note  was  given  for  a  horse,"  or, 
"This  note  was  given  for  a  ditch,"  but  probably  it 
would  not  do  to  add  to  a  note,  "This  note  was  given 
for  a  horse  and  is  not  to  be  paid  if  the  horse  dies," 
nor,  "This  note  is  given  for  a  ditch  to  be  dug  and  is 
not  to  be  paid  unless  the  ditch  is  dug,"  for  when  you 
add  those  last  words  you  do  indicate  that  there  is  a 
condition  to  the  promise  of  the  maker  and  that  he 
is  not  to  pay  in  every  event.  Now  if  that  condition 
is  implied  it  must  be  just  as  bad  as  if  it  is  expressly 
stated.    Suppose  the  addition,  "This  note  is  given 


NEGOTIABLE  INSTRUMENTS  25 

for  a  ditch  to  be  dug."  Does  that  carry  with  it  the 
implication  that  unless  the  ditch  is  dug  the  maker  is 
not  going  to  pay?  It  certainly  suggests  that  impli- 
cation, and  if  so,  it  would  seem  that  the  note  was 
conditional  and  not,  therefore,  a  negotiable  instru- 
ment. It  is,  of  course,  not  necessary  that  an  instru- 
ment should  state  the  transaction  which  gave  rise 
to  it,  or  even  that  it  was  given  for  value  [Section  6 
(2)]. 

26.  SECTION  4.-— [DETERMINABLE  FU- 
TURE TIME;  WHAT  CONSTITUTES.]  An 
instrument  is  payable  at  a  determinable  future  time, 
within  the  meaning  of  this  act,  which  is  expressed  to 
be  payable:  (1)  At  a  fixed  period  after  date  or 
sight;  or  (2)  On  or  before  a  fixed  or  determinable 
future  time  specified  therein;  or  (3)  On  or  at  a  fixed 
period  after  the  occurrence  of  a  specified  event, 
which  is  certain  to  happen,  though  the  time  of  hap- 
pening be  uncertain. 

An  instrument  payable  upon  a  contingency  is  not 
negotiable  and  the  happening  of  the  event  does  not 
cure  the  defect. 

NOTE. — In  the  Wisconsin  Act  instead  of  the  last  para- 
graph, the  following  is  inserted:  "(4)  At  a  fixed  period 
after  the  date  or  sight,  though  payable  before  then  on  a 
contingency.  An  instrument  payable  upon  a  contingency 
is  not  negotiable,  and  the  happening  of  the  event  does  not 
cure  the  defect,  except  as  herein  provided." 

27.  CERTAINTY  OF  TIME  OF  PAYMENT. 
— The  typical  negotiable  instrument  is  payable  at  a 
fixed  day  in  the  future,  as  on  July  1, 1916,  or  in  three 
months  from  date.  An  instrument  payable  on  de- 
mand or  at  sight  or  at  a  fixed  period  after  demand 


26  NEGOTIABLE   INSTRUMENTS 

or  sight  involves  a  little  extension  of  the  principle  of 
certainty,  since  no  one  can  tell  exactly  when  demand 
will  be  made,  but  as  the  holder  can  make  the  time 
certain  by  making  demand,  the  value  of  such  an  in- 
strument is  exactly  calculable,  and  there  has  never 
been  any  question  that  such  instruments  are  nego- 
tiable. But  the  statute  allows  negotiability  to  some 
instruments  where  there  was  doubt  at  common  law, 
though  the  statute  has  followed  what  was  previ- 
ously the  weight  of  authority.  An  instrument  may 
be  payable  "on  or  before"  a  fixed  or  determinable 
future  time.  Therefore,  a  note  payable  on  or  before 
July  1  is  a  negotiable  instrument.  If  this  means  at 
the  option  of  the  holder  there  would  be  no  more  lack 
of  certainty  than  in  demand  paper  since  in  effect  the 
instrument  would  be  payable  on  demand  prior  to 
July  1,  and  if  no  prior  demand  were  made,  then  on 
that  day.  But  the  option  is  that  of  the  maker,  and 
it  is  impossible  for  the  holder  to  tell  whether  the 
option  will  be  exercised.  Still  he  knows  the  exact 
day  when  at  latest  the  instrument  is  payable.  A 
further  latitude,  however,  is  allowed  by  the  enact- 
ment in  subsection  3  that  an  instrument  is  nego- 
tiable though  it  is  payable  on  an  event  "which  is 
certain  to  happen,  though  the  time  of  happening  be 
uncertain."  That,  it  seems,  is  an  objectionable  pro- 
vision, and  the  only  reason  that  the  objection  is  not 
more  apparent  is  because  the  case  which  is  permit- 
ted is  such  a  rare  one.  A  common  illustration  given 
is  a  note  payable  on  a  man's  death;  that  is  a  time 


NEGOTIABLE  INSTRUMENTS  27 

certain  to  happen,  but  the  time  of  happening  is  un- 
certain. Now  such  a  note  is  wholly  unsuited  for  the 
purpose  of  negotiable  instruments.  Negotiable  in- 
struments are  intended  as  a  kind  of  adjunct  to 
money,  as  something  that  has  a  definite  value  and 
which  can  be  dealt  with  on  that  assumption.  It  is 
because  of  this  idea,  that  negotiable  instruments  are 
a  kind  of  adjunct  to  money,  that  all  these  require- 
ments which  we  are  considering  as  to  certainty  of 
the  promise,  the  certainty  of  the  time  and  the  cer- 
tainty of  the  medium  of  payment  are  made.  But  an 
instrument  payable  at  a  man's  death  is,  of  course,  of 
speculative  value.  It  is  customary  to  contrast  with 
such  an  instrument  an  instrument  made  by  a  bache- 
lor payable  on  his  marriage.  That  is  not  certain  to 
happen ;  he  may  never  marry,  and  therefore  such  an 
instrument  is  not  negotiable,  even  under  the  broad 
words  of  the  Negotiable  Instruments  Law.  So  a 
draft  payable  on  the  arrival  of  certain  goods  is  not 
negotiable.    The  goods  may  never  arrive. 

28.  SECTION    5.— [ADDITIONAL    PROVI- 
SIONS NOT  AFFECTING  NEGOTIABILITY.] 

An  instrument  which  contains  an  order  or  promise 
to  do  any  act  in  addition  to  the  payment  of  money 
is  not  negotiable.  But  the  negotiable  character  of 
an  instrument  otherwise  negotiable  is  not  affected 
by  a  provision  which:  (1)  Authorizes  the  sale  of 
collateral  securities  in  case  the  instrument  be  not 
paid  at  maturity;  or  (2)  Authorizes  a  confession  of 
judgment  if  the  instrument  be  not  paid  at  maturity; 
or  (3)  Waives  the  benefit  of  any  law  intended  for 


28  NEGOTIABLE  INSTRUMENTS 

the  advantage  or  protection  of  the  obHgor;  or  <^4) 
Gives  the  holder  an  election  to  require  something  to 
be  done  in  lieu  of  payment  of  money.  But  nothing 
in  this  section  shall  validate  any  provision  or  stipu- 
lation otherwise  illegal. 

NOTE. — In  the  Illinois  Act,  the  words  "under  this  Act," 
are  added  at  the  end  of  the  first  sentence.  The  effect  of  this 
insertion  is  that  the  peculiar  law  previously  in  force  in 
Illinois  allowing  negotiability  to  promises  for  the  delivery 
of  other  things  than  money  still  remains  in  force  after  the 
enactment  of  the  Negotiable  Instruments  Law.  In  the 
Illinois  Act,  also  the  words  "if  the  instrument  be  not  paid 
at  maturity,"  are  omitted  from  subsection  (2).  In  the  Ken- 
tucky Act  subsection  (3)  is  omitted.  In  the  Wisconsin  Act 
the  words:  "Or  authorize  the  waiver  of  exemptions  from 
execution,"  are  added  at  the  end  of  the  section. 

29.  THERE  MUST  BE  NO  ADDITIONAL 
ORDERS  OR  PROMISES.— After  the  require- 
ments in  the  earlier  sections  of  what  a  negotiable 
instrument  must  contain,  section  5  provides  what  it 
must  not  contain.  There  must  not  be  any  other  ad- 
ditional order  or  promise.  The  reason  for  this  is  the 
same  as  for  all  the  formal  requisites  of  bills  and 
notes — namely  that  the  face  of  the  instrument  may 
show  plainly  an  obligation,  the  pecuniary  value  of 
which  can  be  calculated.  The  rule  forbidding  addi- 
tional orders  or  promises,  which  is  taken  by  the 
statute  from  the  common  law,  becomes  quite  im- 
portant in  regard  to  some  of  the  collateral  notes 
which  are  used. 

30.  ADDITIONAL  POWERS  MAY  BE  GIV- 
EN.— Section  5  authorizes  several  provisions  in  a 
note  as  to  which  there   had   been   some   litigation 


NEGOTIABLE  INSTRUMENTS  29 

prior  to  the  enactment  of  the  Negotiable  Instru- 
ments Law.  Thus  a  power  in  the  instrument  to 
sell  collateral  securities  in  case  the  instrument  is 
not  paid  at  maturity  does  not  interfere  with  nego- 
tiability, nor  does  a  power  to  confess  a  judgment  if 
the  instrument  is  not  paid  at  maturity,  but  that  is 
unimportant  in  some  States  because  their  law  does 
not  allow  a  confession  of  judgment  beforehand  by  a 
debtor  as  part  of  an  obligation,  whether  negotiable 
or  not.  In  other  States,  however,  a  debtor  can  give 
his  creditor  at  the  time  the  debt  is  created  a  power 
authorizing  the  clerk  of  court  to  enter  judgment 
against  him,  whenever  the  creditor  may  request.  It 
is  also  not  destructive  of  negotiability  for  the  maker 
or  drawer  to  waive  the  benefit  of  any  stay  or  ex- 
emption law.  That  provision  too  is  unimportant 
in  some  States  because  they  do  not  allow  such  ex- 
emptions as  the  law  gives  to  a  debtor  to  be  waived 
in  advance.  Nor  is  it  objectionable  that  the  note 
gives  the  holder  an  election  to  require  something  to 
be  done  in  lieu  of  the  payment  of  money.  That  last 
provision  seems  a  considerable  addition  to  mercan- 
tile theory.  Suppose  a  promise  or  order  to  pay  A 
$100,  or  at  A's  election  to  build  a  bay  window  on 
his  house.  Such  an  alternative  seems  rather  for- 
eign, perhaps,  to  the  idea  that  negotiable  instru- 
ments are  things  of  a  fixed  value  current  as  an  ad- 
junct to  money,  but  you  will  observe  that  it  is  the 
holder  who  has  the  option  and  the  holder  can  always 
demand  money,  and  therefore  can  properly  fix  a 


30  NEGOTIABLE   INSTRUMENTS 

value  on  that  note  as  if  it  were  simply  for  $100.  If 
the  option  is  given  to  the  maker  of  the  instrument  it 
destroys  negotiability. 

31.     ILLUSTRATIONS    OF    ADDITIONAL 
PROMISES    WHICH    DESTROY    NEGOTIA- 
IBILITY. — Now  these  additions,  of  which  we  have 
spoken,  to  the  promise  in  the  note  or  order  in  the 
bill  are  all  additional  powers  given  to  the  holder 
rather  than  additional  promises  made  by  the  ma- 
ker, and  the  purpose  of  these  powers  is  to  make 
more  certain  of  performance  the  main  promise  to 
pay.     Let  us  suggest  in  contrast  some  additional 
promises  made  by  the  maker.     A  maker  signs  a 
note  which  includes  this  statement:   "There  is  de- 
posited to  secure  this  note  100  shares  of  New  York 
Central,  and  if  at  any  time  this  security  shall  be 
deemed  by  the  payee  of  the  note  insufficient  collat- 
eral, I  promise  to  deposit  further  collateral."  That 
instrument  would  not  be  negotiable.    There  is  in 
addition  to  the  promise  to  pay  money  a  promise  to 
deposit  further  collateral,  and  we  suppose  any  col- 
lateral note  in  which   the  maker   promises   to   do 
other  things  than  to  pay  the  amount  of  the  note  is 
not  a  negotiable  instrument.    Powers  given  to  the 
holder  of  the  instrument  to  sell  the  collateral  would 
not  render  the  instrument  non-negotiable.  A  power, 
however,  to  declare  the  instrument  due  might  be 
regarded  as  more  objectionable,  but  probably  even 
that  would  be  held  to  come  within  the  provision  of 
the  statute  which  says  that  an  instrument  payable 


NEGOTIABLE  INSTRUMENTS  31 

on  or  before  a  fixed  date  is  valid.  In  a  recent  case 
there  was  a  stipulation  on  the  back  of  a  note  that  it 
was  secured  by  collateral  and  that  the  payee  agreed 
to  look  to  this  security  for  its  payment.  It  was  held 
that  that  provision  written  on  the  note  rendered  it 
non-negotiable.  It  was  in  fact  not  a  promise  to 
pay  at  all  events,  but  a  promise  to  pay  out  of  a 
particular  fund,  and  if  the  fund  proved  insufficient 
by  the  terms  of  the  promise  nothing  would  be  due. 

32.  SECTION  6.— [OMISSIONS;  SEAL;  PAR- 
TICULAR MONEY.]  The  vaHdity  and  negotia- 
ble character  of  an  instrument  are  not  effected  by 
the  fact  that:  (1)  It  is  not  dated;  or  (2)  Does  not 
specify  the  value  given,  or  that  any  value  has  been 
given  therefor;  or  (3)  Does  not  specify  the  place 
where  it  is  drawn  or  the  place  where  it  is  payable; 
or  (4)  Bears  a  seal;  or  (5)  Designates  a  particular 
kind  of  current  money  in  which  payment  is  to  be 
made. 

But  nothing  in  this  section  shall  alter  or  repeal 
any  statute  requiring  in  certain  cases  the  nature  of 
the  consideration  to  be  stated  in  the  instrument. 

NOTE. — In  the  Illinois  Act  the  following  words  are  in- 
serted at  the  beginning  of  subsection  (5).  "Is  payable  in 
current  funds:  or",  and  that  Act  also  does  not  contain  the 
final  paragraph  of  the  section. 

33.  DATE  OF  A  NEGOTIABLE  INSTRU- 
MENT.-— The  lack  of  a  date  is  unimportant  in  an 
instrument  unless  it  is  in  terms  payable  a  certain 
period  after  date.  If  an  instrument  in  this  form 
were  undated  it  would  be  an  incomplete  instrument 
which  would  have  to  be  dealt  with  as  provided  in 
section  13. 


32  NEGOTIABLE  INSTRUMENTS 

34.  VALUE  RECEIVED.— Negotiable  instru- 
ments usually  state  that  they  are  for  value  received 
and  this  mode  of  expression  is  of  great  antiquity. 
The  original  theory  of  a  bill  of  exchange,  which 
was  the  earliest  form  of  negotiable  instrument,  was 
based  on  the  assumption  that  the  purpose  of  the 
parties  was  to  exchange  a  sum  of  money  actually 
received  by  the  drawer  at  his  residence  for  a  sum  of 
money  to  be  paid  by  the  drawee  at  another  place. 
Nevertheless,  in  recent  times  at  any  rate,  even  apart 
from  statute,  it  has  not  been  necessary  to  insert 
either  such  a  general  statement  of  consideration  as 
the  words  for  "value  received,"  or  a  particular 
statement  of  the  actual  consideration  given.  The 
last  paragraph  of  section  6  refers  to  certain  special 
statutes  in  a  number  of  States  requiring  that  notes 
given  for  a  patent  right  shall  so  state,  and  there  are 
other  statutes  in  a  few  jurisdictions  requiring  a 
statement  of  the  consideration  in  notes  given  for 
lightning  rods,  or  stallions,  or  to  pedlers.  Such 
statutes,  however,  are  distinctly  exceptional. 

35.  PLACE  OF  DRAWING  OR  PAYMENT.— 
A  negotiable  instrument  need  not  state  where  it  is 
drawn  or  where  it  is  payable,  because  in  the  ab- 
sence of  such  a  statement  the  law  is  able  to  deter- 
mine the  place  with  accuracy.  A  bill  is  drawn  or  a 
note  is  made  where  it  is  delivered.  It  is  payable  at 
the  usual  place  of  business  or  residence  of  the  per- 
son who  should  make  payment.     (See  section  133.) 

36.  SEAL  AND  NEGOTIABILITY.— It  was  a 


NEGOTIABLE  INSTRUMENTS  33 

rule  of  the  common  law  that  a  sealed  instrument 
could  not  be  negotiable.  This  was  due  to  the  fact 
that  under  the  custom  of  merchants  from  which  the 
law  of  bills  and  notes  developed,  such  instruments 
were  not  sealed.  When,  however,  business  cor- 
porations became  common  as  they  did  for  the  first 
time  in  the  nineteenth  century,  and  especially  when 
it  was  desired  to  issue  series  of  bonds  which  should 
be  payable  to  bearer  and  negotiable,  the  common 
law  rule  caused  trouble.  Some  courts  without  the 
aid  of  statutes  declared  that  mercantile  custom  had 
extended  itself  so  that  bonds  payable  to  bearer  be- 
came negotiable  within  the  custom  of  merchants. 
But  the  matter  was  not  so  free  from  doubt,  as  a  gen- 
eral proposition,  as  could  have  been  wished.  Sub- 
section 4  of  this  section,  however,  settles  the  matter. 
37.  INSTRUMENTS  PAYABLE  IN  CUR- 
RENCY.— An  instrument  is  none  the  less  negotia- 
ble because  it  "designates  a  particular  kind  of  cur- 
rent money  in  which  payment  is  to  be  made ;"  that 
is,  a  negotiable  instrument  may  be  payable  in  any 
kind  of  current  money,  as  in  gold  or  in  $1  bills  or 
other  current  money.  But  what  does  current 
money  mean?  Prior  to  the  passage  of  the  Nego- 
tiable Instruments  Law  there  was  considerable  liti- 
gation on  the  question  whether  an  instrument  pay- 
able in  currency  or  in  current  funds  was  negotiable. 
Some  courts  held  that  currency  or  current  funds 
meant  the  money  or  legal  tender  that  was  current, 
and  therefore,  that  the  instrument  was  negotiable. 


34  NEGOTIABLE  INSTRUMENTS 

Other  courts  said  that  currency  or  current  funds 
meant  what  was  current  as  money,  that  is,  used 
as  such ;  whether,  in  fact,  it  was  money  or  not.  It 
seems  probable  that  the  latter  meaning  is  really 
the  true  sense  of  the  words,  and  under  that  mean- 
ing if  it  is  requisite  that  a  negotiable  instrument 
shall  be  payable  in  money,  an  instrument  payable 
in  currency  or  current  funds  is  not  negotiable.  It 
is  probable  that  the  Negotiable  Instruments  Law 
was  meant  to  settle  this  controversy  when  it  pro- 
vided that  an  instrument  is  negotiable  though  it 
designates  a  particular  kind  of  current  money  in 
which  payment  is  to  be  made;  but  it  cannot  be 
said  that  those  words  do  settle  the  controversy. 
"Current  money"  as  used  in  the  statute  does  not 
seem  the  equivalent  of  "currency  or  current  funds," 
if  the  latter  words  are  understood  to  mean  what 
is  used  as  money  whether  it  is  really  money  or 
not.  The  Supreme  Court  of  Iowa,  indeed,  has 
held  that  a  check  payable  in  current  funds  is 
not  payable  in  money  and  is  therefore  not  negotia- 
ble. It  has  been  suggested  that  this  section  of  the 
Negotiable  Instruments  Law  be  universally 
amended  as  it  has  been  in  Illinois,  so  that  the  sub- 
section in  question  shall  read  that  the  negotiable 
character  of  an  instrument  shall  not  be  affected  by 
the  fact  that  it  is  payable  in  currency  or  current 
funds,  or  designates  a  particular  kind  of  current 
money  in  which  payment  is  to  be  made.  In  the 
meantime  it  is  safer  not  to  accept  as  negotiable  any 


NEGOTIABLE  INSTRUMENTS  35 

instrument  expressed  as  payable  in  currency  or  cur- 
rent funds. 

38.  SECTION  7.— [WHEN  PAYABLE  ON 
DEMAND.]  An  instrument  is  payable  on  de- 
mand: (1)  Where  it  is  expressed  to  be  payable  on 
demand,  or  at  sight,  or  on  presentation;  or  (2)  In 
which  no  time  for  payment  is  expressed. 

Where  an  instrument  is  issued,  accepted,  or  in- 
dorsed when  overdue,  it  is,  as  regards  the  person  so 
issuing,  accepting,  or  indorsing  it,  payable  on  de- 
mand. 

39.  WHEN  AN  INSTRUMENT  IS  PAYABLE 
ON  DEMAND. — It  has  already  been  said  that  an 
instrument  may  be  payable  on  demand.  Section  7 
of  the  statute  provides  that  an  instrument  is  pay- 
able on  demand  whether  it  is  expressed  to  be  so 
payable  or  at  sight  or  on  presentation,  also  when  no 
time  of  maturity  is  expressed  in  an  instrument  or 
when  it  is  negotiated  after  maturity.  By  a  later 
amendment  to  the  Negotiable  Instruments  Law  the 
Massachusetts  statutes  have  revived  the  sight  draft 
as  a  distinct  form  of  instrument,  and  the  same  thing 
has  been  done  in  New  Hampshire  and  North  Caro- 
lina, but  not  generally.  The  only  distinction  be- 
tween a  sight  draft  and  a  demand  dr?ift  in  these 
States  is  that  a  sight  draft  is  entitled  to  three  days 
grace,  while  neither  demand  paper  or  time  paper 
under  the  Negotiable  Instrument  Law  is  so  enti- 
tled. Under  the  Negotiable  Instruments  Law  itself 
the  sight  instrument  is  made  identical  with  the  de- 
mand instrument. 


36  NEGOTIABLE  INSTRUMENTS 

40.  RIGHTS  AGAINST  PARTY  TO  OVER- 
DUE PAPER. — Negotiable  paper  is  not  often 
issued  or  accepted  when  on  its  face  overdue,  but  it 
is  entirely  possible  and  the  statute  in  section  7  (2) 
provides  for  it.  Indorsement  of  overdue  paper, 
however,  is  common  enough.  The  indorsee  is  not 
a  holder  in  due  course,  and  takes  subject  to  defences, 
but  he  has  rights  against  his  indorser.  In  effect  the 
indorsee  has,  so  far  as  this  last  indorser  is  con- 
cerned, a  right  to  treat  the  instrument  as  the  in- 
dorsement of  a  new  demand  note,  which  may  be 
presented  within  a  reasonable  time  after  the  in- 
dorsement, even  though  it  had  been  previously 
presented  and  dishonored,  and  may  charge  this  in- 
dorser if  the  note  is  not  paid  on  the  subsequent  pre- 
sentment though  other  indorsers  whose  names  were 
on  the  instrument  before  the  dishonor  would  be  dis- 
charged if  due  diligence  had  not  previously  been 
exercised. 

41.  SECTION  8.— [WHEN  PAYABLE  TO 
ORDER.]  The  instrument  is  payable  to  order 
where  it  is  drawn  payable  to  the  order  of  a  specified 
person  or  to  him  or  his  order.  It  may  be  drawn 
payable  to  the  order  of:  (1)  A  payee  who  is  not 
maker,  drav/er,  or  drawee;  or  (2)  The  drawer  or 
maker;  or  (3)  The  drawee;  or  (4)  Two  or  more 
payees  jointly;  or  (5)  One  or  some  of  several  pay- 
ees; or  (6)  The  holder  of  an  office  for  the  time 
being. 

Where  the  instrument  is  payable  to  order  the 
payee  must  be  named  or  otherwise  indicated 
therein  vv^ith  reasonable  certainty. 


NEGOTIABLE  INSTRUMENTS  37 

NOTE, — In  the  Illinois  Act  after  subsection  (6)  is  in- 
serted: "(7)  An  instrument  payable  to  the  estate  of  a  de- 
ceased person  shall  be  deemed  payable  to  the  order  of  the 
administrator  or  executor  of  his  estate," 

42.  WHO  MAY  BE  A  PAYEE.— An  instru- 
ment payable  to  A,  or  order,  or  payable  to  the  order 
of  A,  is  identical  in  legal  effect;  though  an  instru- 
ment in  the  latter  form  literally  does  not  say  that 
there  is  any  payee  until  A  makes  an  order  to  pay  to 
someone  yet  A  is  legally  the  payee.  Not  infrequent- 
ly instruments  are  made  payable  on  their  face  to  the 
order  of  the  maker  himself,  but  an  instrument  in 
this  form  is  not  really  a  completed  instrument,  it 
only  becomes  so  by  endorsement;  if  the  endorse- 
ment is  to  a  particular  person  that  person  is  in 
effect  the  payee  of  the  instrument.  If  the  indorse- 
ment is  in  blank  the  instrument  is  payable  to  bearer. 
Other  kinds  of  payees  besides  those  enumerated  in 
section  8  are  those  enumerated  in  subsections  3  and 
4  of  the  following  section. 

Subsection  6  of  section  8  changed  the  previ- 
ously existing  rule  of  the  Common  Law.  Until  the 
passage  of  the  Negotiable  Instruments  Law  a  bill 
or  note  payable  to  the  "Treasurer  of  the  A  Com^ 
pany"  was  payable  to  the  person  who  was  treasurer 
at  the  time  the  instrument  was  delivered,  and 
though  he  ceased  to  be  treasurer,  the  instrument 
was  still  payable  to  him,  and  he  alone  could  indorse 
it.  Now  such  an  instrument  would  be  payable  in 
effect  to  the  office  of  treasurer  and  whoever  held 
that  office  at  any  time  could  indorse  as  treasurer. 


38  NEGOTIABLE   INSTRUMENTS 

43.  SECTION  9.— [WHEN  PAYABLE  TO 
BEARER.]  The  instrument  is  payable  to  bearer: 
(1)  When  it  is  expressed  to  be  so  payable;  or  (2) 
When  it  is  payable  to  a  person  named  therein  or 
bearer;  or  (3)  When  it  is  payable  to  the  order  of  a 
fictitious  or  non-existing  person,  and  such  fact  was 
known  to  the  person  making  it  so  payable;  or  (4) 
When  the  name  of  the  payee  does  not  purport  to  be 
the  name  of  any  person;  or  (5)  When  the  only  or 
last  indorsement  is  an  indorsement  in  blank. 

NOTE. — In  the  Illinois  Act  subsections  (3)  and  (5)  are 
as  follows:  "(3)  When  it  is  payable  to  the  order  of  a  per- 
son known  by  the  drawer  or  maker  to  be  fictitious  or  non- 
existent, or  of  a  living  person  not  intended  to  have  any  in- 
terest in  it."  "(5)  When,  although  originally  payable  to 
order,  it  is  indorsed  in  blank  by  the  payee  or  a  subsequent 
indorsee." 

4^.  FICTITIOUS  PAYEES.— The  first  two 
subsections  of  section  9  present  no  difficulty  but  the 
enactment  in  subsection  3  that  an  instrument  is  pay- 
able to  bearer  when  by  its  terms  it  is  payable  to  the 
order  of  a  fictitious  or  nonexisting  person,  and  such 
fact  was  known  to  the  person  making  it  so  payable, 
needs  some  comment.  Let  us  illustrate  that  situa- 
tion a  moment:  a  firm  in  New  York  has  an  em- 
ployee whose  duty  it  is  to  buy  goods,  verify  the 
bills  for  the  goods,  draw  checks  payable  to  the  sel- 
lers of  the  goods,  and  bring  the  checks  to  the  mem- 
bers of  the  firm  for  signature.  This  employee,  de- 
siring to  commit  a  fraud,  pretends  that  certain  lots 
of  goods  have  been  received,  and  draws  checks 
which  he  presents  to  his  employer  for  signature, 
gets  them  signed,  then  indorses  them  and  obtains 


NEGOTIABLE  INSTRUMENTS  39 

the  money.  Now  are  those  checks  payable  to  bear- 
er? If  so,  the  bank  which  paid  them  has  made  a 
good  payment.  If  they  are  not  payable  to  bearer, 
however,  unless  they  are  properly  indorsed,  the 
bank  which  pays  them  is  not  entitled  to  charge  the 
payment  against  its  customer's  account.  They  are 
not  payable  to  bearer  because  if  the  person  to  whom 
they  were  payable  was  fictitious  that  was  not 
known  to  the  drawer,  the  person  making  them  so 
payable.  Whether  they  were  payable  to  the  em- 
ployee himself,  so  that  his  indorsement  of  them  is 
valid,  is  then  the  question.  He  intended  that  the 
check  should  be  used  by  him  and  in  effect  he  intend- 
ed to  be  the  payee,  but  the  drawer  did  not  intend  to 
make  him  so.  We  may  suppose  that  the  drawer  in 
signing  a  check  payable  to  X  Y  for  goods  had  in 
mind  that  there  was  a  genuine  firm  of  that  name  or 
he  would  not  have  signed  the  check.  If  in  fact  there 
v/as  a  genuine  person  or  firm  it  alone  could  indorse ; 
if  there  was  not  a  genuine  firm,  then  nobody  could 
indorse.  The  instrument  would  not  be  payable  to 
bearer  because  the  drawer  did  not  know  that  the 
payee  was  fictitious.  It  would  not  be  payable  to 
the  fraudulent  clerk,  or  to  any  other  existing  per- 
son, because  the  drawer  did  not  intend  that  the 
check  should  be  payable  to  him. 

45.  OTHER  INSTRUMENTS  PAYABLE  TO 
BEARER. — Section  9  also  enumerates  as  payable 
to  bearer  an  instrument  where  the  payee  does  not 
purport  to  be  the  name  of  any  person,  as  "cash;'* 


40  NEGOTIABLE  INSTRUMENTS 

and  finally,  where  the  only  or  last  indorsement  is  an 
indorsement  in  blank.  This  provision  involves  at 
least  an  apparent  conflict  with  section  40  of  the  act. 
Section  40  provides  that  if  an  instrument  payable  to 
bearer  is  indorsed  specially,  it  may  nevertheless  be 
further  negotiated  by  delivery.  Suppose,  then,  an 
instrument  is  payable  to  bearer  on  its  face,  the 
holder  of  it  indorses  it  specially  to  Y;  Y  loses  the 
instrument,  it  is  found  by  W,  who  sells  it  before 
maturity  to  Z,  an  innocent  holder.  Can  Z  sue  on 
that  instrument  in  spite  of  the  fact  that  it  is  spec- 
ially indorsed  to  Y?  It  would  seem  under  section 
40  that  he  can.  The  instrument,  though  payable  to 
bearer  and  specially  indorsed,  may  nevertheless  be 
further  negotiated  by  delivery.  Contrast  with  that 
case  the  following:  an  instrument  payable  to  the 
order  of  A  on  the  face  is  indorsed  by  A  in  blank, 
and  a  subsequent  holder,  B,  indorses  specially  to  C ; 
that  instrument  is  also  lost  and  picked  up  and  sold 
to  Z,  a  bona  fide  purchaser.  Can  Z  here  disregard 
the  special  indorsement  and  go  back  to  the  blank 
indorsement  and  claim  under  that  as  on  an  instru- 
ment payable  to  bearer?  It  seems  he  cannot  do 
that,  for  section  9  (5)  says  an  instrument  is  payable 
to  bearer  when  the  only  or  last  indorsement  is  an 
indorsement  in  blank.  In  this  case  the  last  indorse- 
ment was  a  special  indorsement;  accordingly,  the 
instrument  when  sold  to  Z  was  no  longer  payable 
to  bearer,  and  Z,  therefore,  would  have  to  get  the 
indorsement  of  the  special  indorsee  in  order  to  get 


NEGOTIABLE  INSTRUMENTS         41 

title.  Section  40  probably  does  not  affect  this  case, 
because  the  instrument  was  on  its  face  payable  to 
order — not  to  bearer.  In  other  words,  Sections  40 
and  9  (5)  can  only  be  made  to  avoid  a  contradiction 
of  one  another  by  confining  the  application  of  Sec- 
tion 40  to  instruments  payable  on  the  face  to  bearer 
and  by  holding  such  instruments  as  are  covered  by 
Section  9  (5)  not  included.  On  strict  theory  a  blank 
indorsement  is  a  blank  power  authorizing  the  hold- 
er to  insert  his  own  name  or  that  of  anyone  else  as 
indorsee,  but  under  the  statute  a  blank  indorsement 
is  a  little  more  than  that;  it  is  making  the  instru- 
ment payable  to  bearer,  though  the  holder  by  in- 
serting the  name  of  himself  or  of  another  person  in 
the  blank  space  above  the  indorsement  name  may 
change  the  instrument  from  one  payable  to  bearer 
to  one  payable  to  a  special  indorsee  or  order. 

The  only  practical  difference  between  treating  an 
instrument  with  a  blank  indorsement  as  payable  to 
bearer  or  as  giving  a  power  to  any  holder  is  merely 
that  on  the  latter  supposition  the  instrument  is  in- 
complete until  the  power  is  exercised  and  the  blank 
would  have  to  be  filled  in  before  the  holder  could 
sue. 

46.  SECTION  10.— [TERMS  WHEN  SUFFI- 
CIENT.] The  instrument  need  not  follow  the 
language  of  this  act,  but  any  terms  are  sufficient 
which  clearly  indicate  an  intention  to  conform  to 
the  requirements  hereof. 

47.  SECTION  11.— [DATE,  PRESUMPTION 
AS  TO.]    Where  the  instrument  or  an  acceptance 


42  NEGOTIABLE  INSTRUMENTS 

or  any  indorsement  thereon  is  dated,  such  date  is 
deemed  prima  facie  to  be  the  true  date  of  the  mak- 
ing, drawing,  acceptance,  or  indorsement  as  the 
case  may  be. 

48.  INSTRUMENT  TAKES  EFFECT  FROM 
DELIVERY.— Though  the  date  written  on  a  nego- 
tiable instrument  is  often  important,  it  should  be 
remembered  that  the  instrument  takes  effect  not 
from  the  day  it  bears  date,  but  from  the  day  of 
delivery,  and  this  is  true  of  any  obligation  upon  a 
negotiable  instrument,  whether  that  of  maker, 
drawer,  acceptor  or  indorser. 

49.  SECTION  12.— [ANTE-DATED  AND 
POST-DATED.]  The  instrument  is  not  invalid 
for  the  reason  only  that  it  is  ante-dated  or  post- 
dated, provided  this  is  not  done  for  an  illegal  or 
fraudulent  purpose.  The  person  to  whom  an  in- 
strument so  dated  is  delivered  acquires  the  title 
thereto  as  of  the  date  of  delivery. 

50.  FRAUDULENT  ANTE-DATING  OR 
POST-DATING.— This  section  suggests  but  does 
not  answer  the  question,  what  is  the  effect  of  ante- 
dating or  post-dating  an  instrument  for  an  illegal  or 
fraudulent  purpose.  The  implication  from  the  sec- 
tion would  be  that  such  an  instrument  was  invalid, 
but  its  invalidity  could  probably  not  be  set  up 
against  a  holder  in  due  course.  Suppose  a  note  actu- 
ally made  and  delivered  on  Sunday  is  ante-dated  or 
post-dated  so  that  it  shall  appear  to  have  been  made 
on  Saturday  or  Monday.  In  a  jurisdiction  where 
the  Sunday  law  forbids  doing  business  on  that  day, 


NEGOTIABLE  INSTRUMENTS  43 

doubtless  the  instrument  could  not  be  enforced  be- 
tween the  original  parties,  but  one  who  purchased 
the  instrument  having  no  knowledge  of  the  facts 
would  certainly  be  justified  in  relying  on  the  date  as 
written.  The  mere  fact  that  an  instrument  is  post- 
dated does  not  prevent  one  who  takes  it  with 
knowledge  of  the  fact  from  being  a  holder  in  due 
course. 

51.  SECTION  13.— [WHEN  DATE  MAY  BE 
INSERTED.]  Where  an  instrument  expressed  to 
be  payable  at  a  fixed  period  after  date  is  issued  un- 
dated, or  where  the  acceptance  of  an  instrument 
payable  at  a  fixed  period  after  sight  is  undated,  any 
holder  may  insert  therein  the  true  date  of  issue  or 
acceptance,  and  the  instrument  shall  be  payable  ac- 
cordingly. The  insertion  of  a  wrong  date  does  not 
avoid  the  instrument  in  the  hands  of  a  subsequent 
holder  in  due  course;  but  as  to  him,  the  date  so 
inserted  is  to  be  regarded  as  the  true  date. 

52.  INSERTION  OF  WRONG  DATE.— No 
question  is  likely  to  arise  under  this  section  where 
the  true  date  is  inserted  after  the  issue  of  the  instru- 
ment. The  final  sentence  of  the  section,  however, 
suggests  an  inquiry.  The  implication  of  the  sen- 
tence is  that  the  insertion  of  a  wrong  date  will  avoid 
an  instrument  in  the  hands  of  the  original  person 
who  made  the  insertion ;  or  in  the  hands  of  any  one 
taking  from  him  with  notice  or  after  maturity,  for 
such  a  person  is  not  a  holder  in  due  course.  This 
seems  a  heavy  penalty  if  the  erroneous  date  was 
inserted  without  fraudulent  intent,  and  on  the  sup- 


44  NEGOTIABLE  INSTRUMENTS 

position  that  the  date  inserted  was  the  true  one. 
The  moral  to  be  drawn  is  that  a  date  should  not  be 
inserted  in  an  undated  instrument  unless  one  is  per- 
fectly sure  that  the  insertion  represents  the  true 
date. 

53.  SECTION  14.— [BLANKS;  WHEN  MAY 
BE  FILLED.]  Where  the  instrument  is  wanting 
in  any  material  particular,  the  person  in  possession 
thereof  has  a  prima  facie  authority  to  complete  it  by 
filling  up  the  blanks  therein.  And  a  signature  on  a 
blank  paper  delivered  by  the  person  making  the 
signature  in  order  that  the  paper  may  be  converted 
into  a  negotiable  instrument  operates  as  a  prima 
facie  authority  to  fill  up  as  such  for  any  amount.  In 
order,  however,  that  any  such  instrument  when 
completed  may  be  enforced  against  any  person 
who  became  a  party  thereto  prior  to  its  completion, 
it  must  be  filled  up  strictly  in  accordance  with  the 
authority  given  and  within  a  reasonable  time.  But 
if  any  such  instrument,  after  completion,  is  nego- 
tiated to  a  holder  in  due  course,  it  is  valid  and  effec- 
tual for  all  purposes  in  his  hands,  and  he  may  en- 
force it  as  if  it  had  been  filled  up  strictly  in  accord- 
ance with  the  authority  given  and  within  a  reason- 
able time. 

NOTE.— In  the  Illinois  Act  the  words  "issued  or"  are 
inserted  before  "negotiated"  in  the  last  sentence.  In  the 
Wisconsin  Act  the  words  "prior  to  negotiation"  are  ^  in- 
serted before  the  words  "by  filling;"  and  the  words  "prima 
facie"  in  the  middle  of  the  section  are  omitted. 

54.  FILLING  BLANKS.— This  section  deals 
generally  with  the  problem  of  which  one  applica- 
tion was  discussed  under  the  preceding  section 
with  reference  to  an  omission  of  the  date.    By  fil- 


NEGOTIABLE  INSTRUMENTS         45 

ling  in  a  blank  we  do  not  mean  filling  in  a  space 
carelessly  left  in  the  place  where  the  amount  of  the 
instrument  is  written,  but  the  filling  in  of  a  space 
intentionally  left.  The  statute  makes  express  pro- 
vision for  this  sort  of  thing  in  sections  13,  14, 15  and 
138.  In  substance,  the  effect  of  these  sections  is 
that  any  holder  in  due  course  who  takes  the  instru- 
ment after  it  has  been  completely  filled  in  can 
enforce  it.  The  person  who  left  the  blanks  is  bound 
by  the  way  they  are  filled  in  so  far  as  the  holder  in 
due  course  is  concerned,  but  any  one  who  took  the 
instrument  while  there  were  still  blanks  in  it  must 
at  his  peril  find  out  what  the  actual  authority  is  to 
fill  in  the  blanks,  and  he  can  only  recover  to  the 
extent  that  actual  authority  was  given  to  fill  in  the 
blanks.  The  troublesome  case  is  where  the  holder 
takes  the  instrument  after  the  blanks  have  been 
filled  in,  but  knowing  that  there  had  been  blanks. 
Is  that  person  bound  to  find  out  at  his  peril  what 
the  original  authority  was?  That  seems  on  the 
wording  of  the  statute  a  doubtful  case.  These  are 
the  facts  of  a  case  that  arose  in  England :  the  defen- 
dant signed  blank  forms  of  promissory  notes  and 
left  them  with  his  attorney,  giving,  however,  the 
attorney  no  authority  to  complete  and  issue  these 
notes  until  instructed  by  telegraph  or  letter  from 
the  maker.  Nevertheless,  the  attorney,  without  fur- 
ther instruction,  filled  up  the  blanks,  making  the 
plaintiff  the  payee  of  the  notes.  The  plaintiff  bought 
the  notes  in  good  faith  and  for  value,  but  he  knew, 


46  NEGOTIABLE  INSTRUMENTS 

nevertheless,  that  they  had  been  signed  in  blank 
and  had  been  left  with  the  attorney ;  but  the  payee 
supposed  the  attorney  was  following  the  directions 
which  had  been  given  him  by  the  maker.  The 
plaintiff  made  no  inquiry  in  regard  to  the  attorney's 
lauthority.  He  took  it  for  granted  that  the  attorney 
was  acting  properly.  The  English  court  held  that 
the  maker  was  not  liable  on  those  instruments.  It 
seems  like  a  pretty  hard  decision.  Perhaps  it  might 
not  be  followed  in  this  country.  Nevertheless,  the 
fact  that  there  has  been  one  such  decision,  and  a 
decision  under  the  English  statute,  which  is  identi- 
cal with  the  American  Negotiable  Instruments 
Law,  in  the  provisions  controlling  this  question, 
makes  the  probability  rather  that  way. 

55.  SECTION  15.  —  [INCOMPLETE  IN- 
STRUMENT NOT  DELIVERED.]  Where  an 
incomplete  instrument  has  not  been  delivered  it  will 
not,  if  completed  and  negotiated,  without  author- 
ity, be  a  valid  contract  in  the  hands  of  any  holder, 
as  against  any  person  whose  signature  was  placed 
thereon  before  delivery. 

56.  LACK  OF  DELIVERY  AN  ABSOLUTE 
DEFENCE  TO  AN  INCOMPLETE  INSTRU- 
MENT.— This  section  should  be  contrasted  with 
the  following  one.  Lack  of  delivery  of  a  com- 
pleted instrument  does  not  excuse  one  whose  name 
is  attached  to  it.  There  is  only  what  we  have 
called  a  personal  defence  or  equity  which  will  not 
be  available  against  a  holder  in  due  course.  But  if 
the  instrument  is  incomplete  it  cannot  be  made 


NEGOTIABLE  INSTRUMENTS  47 

valid  even  in  the  hands  of  such  a  holder.  In  other 
words  when  we  attach  our  names  to  a  completed 
instrument  we  must  guard  it  at  our  peril.  Even  if 
stolen  from  us  we  may  be  made  liable  upon  it;  but 
while  it  is  incomplete  we  run  no  such  risk. 

57.  SECTION  16.— [DELIVERY:  WHEN  EF- 
FECTUAL: WHEN  PRESUMED.]  Every  con- 
tract on  a  negotiable  instrument  is  incomplete  and 
revocable  until  delivery  of  the  instrument  for  the 
purpose  of  giving  effect  thereto.  As  between  im- 
mediate parties,  and  as  regards  a  remote  party 
other  than  a  holder  in  due  course,  the  delivery,  in 
order  to  be  effectual,  must  be  made  either  by  or 
under  the  authority  of  the  party  making,  drawing, 
accepting  or  indorsing,  as  the  case  may  be;  and  in 
such  case  the  delivery  may  be  shown  to  have  been 
conditional,  or  for  a  special  purpose  only,  and  not 
for  the  purpose  of  transferring  the  property  in  the 
instrument.  But  where  the  instrument  is  in  the 
hands  of  a  holder  in  due  course,  a  valid  delivery 
thereof  by  all  parties  prior  to  him  so  as  to  make 
them  liable  to  him  is  conclusively  presumed.  And 
where  the  instrument  is  no  longer  in  the  possession 
of  a  party  whose  signature  appears  thereon,  a  valid 
and  intentional  delivery  by  him  is  presumed  until 
the  contrary  is  proved. 

NOTE. — In  the  North  Carolina  Act  the  word  "accept- 
ing" is  omitted  from  the  second  sentence.  In  the  Kansas 
Act  the  third  sentence  of  the  section  is  omitted. 

58.  LACK  OF  DELIVERY  OF  A  COMPLETE 
INSTRUMENT  IS  A  PERSONAL  DEFENCE. 
— ^Though  the  opening  sentence  of  this  section  says 
delivery  is  essential,  a  later  sentence  says  that  when 


48  NEGOTIABLE  INSTRUMENTS 

in  the  hands  of  a  holder  in  due  course  an  instru- 
ment is  "conclusively  presumed"  to  have  been  deliv- 
ered. That  means  that  even  though  there  was  no 
delivery  there  will  be  liability  to  a  holder  in  due 
course.  The  result  of  the  section  is  that  a  party 
whose  signature  is  on  an  instrument  but  who  never 
delivered  the  signed  instrument  has  a  personal  de- 
fence or  equity  but  nothing  more. 

59.  SECTION  17.  —  [CONSTRUCTION 
WHERE  INSTRUMENT  IS  AMBIGUOUS.] 
Where  the  language  of  the  instrument  is  ambigu- 
ous or  there  are  omissions  therein,  the  following 
rules  of  construction  apply:  (1)  Where  the  sum 
payable  is  expressed  in  words  and  also  in  figures 
and  there  is  a  discrepancy  between  the  two,  the 
sum  denoted  by  the  words  is  the  sum  payable ;  but 
if  the  words  are  ambiguous  or  uncertain,  reference 
may  be  had  to  the  figures  to  fix  the  amount;  (2) 
Where  the  instrument  provides  for  the  payment  of 
interest,  without  specifying  the  date  from  which 
interest  is  to  run,  the  interest  runs  from  the  date  of 
the  instrument,  and  if  the  instrument  is  undated, 
from  the  issue  thereof.  (3)  Where  the  instrument 
is  not  dated,  it  will  be  considered  to  be  dated  as  of 
the  time  it  was  issued;  (4)  Where  there  is  a  con- 
flict between  the  written  and  printed  provisions  of 
the  instrument,  the  written  provisions  prevail;  (5) 
Where  the  instrument  is  so  ambiguous  that  there 
is  doubt  whether  it  is  a  bill  or  note,  the  holder  may 
treat  it  as  either  at  his  election;  (6)  Where  a  signa- 
ture is  so  placed  upon  the  instrument  that  it  is  not 
clear  in  what  capacity  the  person  making  the  same 
intended  to  sign,  he  is  to  be  deemed  an  indorser; 


NEGOTIABLE  INSTRUMENTS  49 

(7)  Where  an  instrument  containing  the  words  "I 
promise  to  pay"  is  signed  by  two  or  more  persons, 
they  are  deemed  to  be  jointly  and  severally  liable 
thereon. 

NOTE.— In  the  North  Carolina  Act  subsection  (2)  is 
omitted.  In  the  Wisconsin  Act  is  added:  "(8)  Where 
several  writings  are  executed  at  or  about  the  same  time,  as 
parts  of  the  same  transactions,  intended  to  accomplish  the 
same  object,  they  may  be  construed  as  one  and  the  same  in- 
strument as  to  all  parties  having  notice  thereof." 

60.  RULES  OF  CONSTRUCTION.— The  pro- 
visions of  this  section  are  in  the  main  self  explana- 
tory. The  figures  which  it  is  customary  to  put  in  a 
bill  or  note  to  indicate  the  amount  are  not  regarded 
strictly  as  part  of  the  instrument.  If  the  amount  is 
also  written  out  in  words  the  figures  are  considered 
merely  a  memorandum.  The  4th  sub-section 
states  a  rule  of  construction  that  is  applicable  not 
only  to  bills  and  notes  but  to  all  written  contracts. 
The  rule  rests  on  the  natural  supposition  that  the 
parties  are  more  likely  to  have  overlooked  or  mis- 
read the  printed  matter  in  the  form  which  they  used 
than  they  are  to  have  written  what  they  did  not 
intend.  The  typical  case,  which  gave  rise  to  the 
5th  subsection,  presented  an  instrument  in  this 
form,  "On  demand  I  promise  to  pay  B,  or  bearer, 
the  sum  of  £15  value  received."  This  was  signed 
and  addressed  to  J.  Bell,  to  whom  it  was  presented, 
and  who  wrote  upon  it  "accepted,  J.  Bell."  It  was 
held  that  Bell  was  liable  as  an  acceptor  of  a  bill 
though  the  holder  might,  had  he  chosen,  have  sued 
the  original  signer  of  the  instrument  as  the  maker 


50  NEGOTIABLE  INSTRUMENTS 

of  a  promissory  note.  The  7th  subsection  follows 
the  rule  of  the  common  law.  The  instrument  as 
written  is  self  contradictory,  being  signed  by  sev- 
eral persons,  but  beginning  *T"  promise  to  pay.  If 
it  read  "we  promise  to  pay,"  the  obligation  would 
|be  joint;  that  is,  all  the  parties  would  have  to  be 
joined  in  an  action.  The  use  of  the  word  "I,"  how- 
ever, is  thought  to  indicate  an  intent  that  each  per- 
son shall  be  severally  liable;  therefore  the  makers 
of  such  an  instrument  may  all  be  sued  jointly  or 
each  of  them  may  be  sued  separately. 

61.  SECTION  18.— [LIABILITY  OF  PER- 
SON SIGNING  IN  TRADE  OR  ASSUMED 
NAME.]  No  person  is  liable  on  the  instrument 
whose  signature  does  not  appear  thereon,  except  as 
herein  otherwise  expressly  provided.  But  one  who 
signs  in  a  trade  or  assumed  name  will  be  liable  to 
the  same  extent  as  if  he  had  signed  in  his  own 
name. 

62.  FORM  OF  SIGNATURE.— This  section 
applies  to  negotiable  instruments  a  rule  which  the 
common  law  applied  to  sealed  instruments  but  did 
not  apply  to  oral  contracts  or  to  informal  written 
contracts,  namely,  that  a  person  who  has  osten- 
sibly contracted  could  not  be  shown  to  have  been 
an  agent  for  a  principal  whether  the  principal  was 
disclosed  or  undisclosed.  If,  on  behalf  of  his  prin- 
cipal, an  agent  enters  into  a  simple  contract  with 
another  person,  the  latter  can  charge  the  principal 
on  the  agent's  contract  even  though  the  agent  did 
not  announce  that  he  was  acting  on  behalf  of  his 


NEGOTIABLE  INSTRUMENTS  51 

principal,  and  this  fact  was  wholly  unknown  at  the 
time  to  the  person  with  whom  he  dealt.  On  the 
other  hand  in  sealed  instruments  and  in  negotiable 
instruments,  the  person  who  signs  the  documents 
is  the  only  party  liable,  and  it  is  immaterial  that  the 
payee  or  other  holders  of  the  instrumient  know  that 
he  signed  the  instrument  on  behalf  of  his  principal 
and  in  his  principal's  business.  A  name  may  be 
signed  by  mark  or  by  any  assumed  name.  It  is 
sometimes  supposed  that  we  cannot  change  our 
names  without  the  authority  of  court  or  legisla- 
ture, but  in  fact  anybody  can  assume  any  name  he 
pleases;  at  least  if  he  does  so  without  fraudulent 
intent.  It  may  take  some  time  for  an  assumed 
name  to  become  known  as  his,  so  as  to  give  him  a 
right  to  complain  if  other  persons  do  not  identify 
him  as  the  one  intended  by  the  name,  but  he  will 
incur  liability  without  difficulty  the  very  first  time 
he  uses  an  assumed  name  if  he  signs  it  to  an  obliga- 
tion. 

63.  SECTION  19.  —  [SIGNATURE  BY 
AGENT;  AUTHORITY;  HOW  SHOWN.]  Thei 
signature  of  any  party  may  be  made  by  a  duly 
authorized  agent.  No  particular  form  of  appoint- 
ment is  necessary  for  this  purpose ;  and  the  author- 
ity of  the  agent  may  be  established  as  in  other  cases 
of  agency. 

NOTE. — In  the  Kentucky  Act  instead  of  this  section  it 
is  provided  that:  "The  signature  of  any  party  may  be 
made  by  an  agent  duly  authorized  in  writing." 


52  NEGOTIABLE  INSTRUMENTS 

64.  WHEN  A  SIGNATURE  BY  AN  AGENT 
BINDS  THE  PRINCIPAL.— An  agent  may  bind 
his  principal  by  signing  negotiable  paper  if  (1)  the 
agent  had  actual  or  apparent  authority  so  to  do, 
and  (2)  exercises  the  authority  by  a  form  of  signa- 
ture sufficient  to  charge  the  principal.  A  signature 
of  the  principal's  name  by  the  agent  without  any 
indication  that  the  namic  was  signed  by  an  agent  is 
sufficient,  though  business  propriety  requires  that 
the  instrument  should  state  that  the  principal's 
name  was  signed  "by  A.  B.  Agent."  A  signature 
of  the  agent's  name  followed  by  the  words  "on  ac- 
count" of  a  named  principal  makes  the  instrument 
the  obligation  of  the  principal,  so  if  made  on  "be- 
half of"  or  "for"  a  named  principal. 

65.  SECTION  20.— [LIABILITY  OF  PER- 
SON SIGNING  AS  AGENT,  ETC.]  Where  the 
instrument  contains  or  a  person  adds  to  his  signa- 
ture words  indicating  that  he  signs  for  or  on  behalf 
of  a  principal,  or  in  a  representative  capacity,  he  is 
not  liable  on  the  instrument  if  he  was  duly  author- 
ized ;  but  the  mere  addition  of  words  describing  him 
as  an  agent,  or  as  filling  a  representative  character, 
without  disclosing  his  principal,  does  not  exempt 
him  from  personal  liability. 

NOTE.— In  the  Virginia  Act  after  the  word  "capacity" 
the  words  "without  disclosing  his  principal"  are  inserted. 

66.  DESCRIPTIO  PERSONAE.— In  contrast 
with  the  cases  referred  to  under  the  previous  sec- 
tions are  to  be  noted  numerous  cases  where  it  is 
held  that  the  mere  addition  of  the  word  "agent"  or 


NEGOTIABLE  INSTRUMENTS  53 

such  official  designation  as  "President,"  "Treas- 
urer," "Trustee,"  in  the  absence  of  words  in  the 
body  of  the  instrument  showing  a  different  intent 
does  not  make  the  instrument  the  obligation  of  the 
principal  or  corporation,  but  the  obligation  is  that 
of  the  agent  or  official  personally.  The  addition  to 
the  signature  is  treated  as  matter  of  description 
like  "Colonel"  or  "Professor."  This  result  doubt- 
less violates  the  intention  of  the  parties  in  most  in- 
stances. The  reason  for  its  adoption  is  because  if 
the  agent  were  not  held  personally  liable,  no  one 
would  be  liable.  The  principal  could  not  be  be- 
cause he  is  not  named  in  the  instrument,  and,  as  has 
already  been  said,  no  one  whose  signature  does  not 
appear  on  the  instrument  can  be  held  liable  upon 
it.  If,  however,  the  body  of  the  instrument  states 
the  nam.e  of  the  principal  the  signature  "A.  B. 
Agent,"  will  make  the  obligation  that  of  the  princi- 
pal, not  of  the  agent. 

67.  SECTION  21.— [SIGNATURE  BY  PRO- 
CURATION; EFFECT  OF.]  A  signature  by 
"procuration"  operates  as  notice  that  the  agent  has 
but  a  limited  authority  to  sign,  and  the  principal  ist 
bound  only  in  case  the  agent  in  so  signing  acted 
within  the  actual  limits  of  his  authority. 

68.  PROCURATION.— In  regard  to  signature 
of  agents  generally,  it  is  the  rule  that  the  principal 
is  bound  not  only  when  the  agent  had  actual  author- 
ity to  execute  the  instrument  in  question,  but  also 
where  he  had  apparent  authority.  Where,  however, 


54  NEGOTIABLE  INSTRUMENTS 

the  agent's  signature  is  made  per  procuration,  ap- 
parent authority  is  insufficient;  nothing  but  actual 
authority  will  bind  the  principal. 

69.  SECTION  22.— [EFFECT  OF  INDORSE- 
MENT BY  INFANT  OR  CORPORATION.]  The 
indorsement  or  assignment  of  the  instrument  by  a 
corporation  or  by  an  infant  passes  the  property 
therein,  notwithstanding  that  from  want  of  capac- 
ity the  corporation  or  infant  may  incur  no  liability 
thereon. 

70.  ULTRA  VIRES  INDORSEMENT,  BY  A 
CORPORATION.— Prior  to  the  passage  of  the 
Negotiable  Instruments  Law  the  rule  in  regard  to 
the  acts  of  corporations  was  this:  If  the  corpora- 
tion had  not  power  to  do  a  certain  act  or,  in  legal 
phrase,  if  its  action  was  ultra  vires,  it  was  held  by 
many  authorities  that  the  transaction  was  actually 
void.  The  corporation,  therefore,  would  not  be 
liable  by  virtue  of  the  signature  of  its  name,  nor 
would  the  signature  be  effectual  to  transfer  title  to 
another.  Section  22  of  the  statute,  therefore, 
changes  the  law  in  these  jurisdictions  so  far  as  the 
transfer  of  title  to  the  instrument  is  concerned. 
Business  corporations  generally  have  power  to  en- 
ter into  obligations  on  negotiable  paper. 

71.  INDORSEMENT  BY  AN  INFANT.— The 
case  of  an  infant  was  a  little  different  at  common 
law  from  that  of  a  corporation.  An  infant,  that  is 
a  minor,  at  common  law,  could  transfer  title,  but 
could  avoid  such  a  transfer  unless  after  attaining 
his  majority,  he  ratified  the  transfer.    It  is  not  clear 


NEGOTIABLE  INSTRUMENTS  55 

from  the  wording  of  the  statute  whether  an  infant 
has  now  lost  his  capacity  to  re-vest  title  in  himself. 
Presumably  the  law  is  unchanged  in  this  respect. 
Therefore,  an  instrument  which  has  formerly  be- 
longed to  an  infant  whose  indorsement  is  necessary 
to  complete  the  holder's  claim  of  title,  is  not  a  desir- 
able instrument  to  purchase. 

72.  SECTION  23.— [FORGED  SIGNATURE; 
EFFECT  OF.]  When  a  signature  is  forged  or 
made  without  the  authority  of  the  person  whose 
signature  it  purports  to  be,  it  is  wholly  inoperative, 
and  no  right  to  retain  the  instrument,  or  to  give  a 
discharge  therefor,  or  to  enforce  payment  thereof 
against  any  party  thereto,  can  be  acquired  through 
or  under  such  signature,  unless  the  party,  against 
whom  it  is  sought  to  enforce  such  right,  is  pre- 
cluded from  setting  up  the  forgery  or  want  of  auth- 
ority. 

73.  LACK  OF  GENUINENESS  BECAUSE 
OF  FORGERY.— Lack  of  genuineness  of  the  in- 
strument is  an  absolute  defence.  This  may  arise 
from  several  causes,  for  instance,  forgery.  This  is 
referred  to  in  section  23  of  the  statute,  where  it  is 
expressly  provided  that  when  a  signature  is  forged 
or  made  without  authority  it  is  not  operative,  unless 
the  party  against  whom  it  is  sought  to  enforce  the 
instrument  is  precluded  from  setting  up  the  forgery 
or  want  of  authority.  When  is  one  precluded  from 
setting  up  forgery  or  want  of  authority?  When- 
ever he  has  led  anybody  to  believe  that  the  signa- 
ture is  genuine  or  authorized,  and  that  person  has 


56  NEGOTIABLE  INSTRUMENTS 

in  reliance  on  the  belief  changed  his  position.  Sup- 
pose this  case.  A's  signature  is  forged,  but  he  nev- 
ertheless when  asked  by  some  one  if  that  is  his  note 
says,  "Yes."  Relying  on  that  statement  the  in- 
quirer purchases  the  note.  A  could  not  thereafter 
'set  up  the  defence  of  forgery.  But  suppose  the  pur- 
chaser purchased  the  note  first,  and  having  pur- 
chased it  asked  the  maker  if  that  was  his  signature. 
Here  again  the  maker  says,  "Yes."  In  this  case  he 
will  not  be  precluded  for  setting  up  the  forgery  be- 
cause no  action  has  been  taken  in  reliance  on  his 
statement,  and  a  forgery  according  to  the  weight  of 
authority  cannot  be  ratified  or  adopted  by  a  mere 
assent  to  be  bound,  unless  there  has  been  a  reliance 
on  the  adoption  and  a  change  of  position.  A  drawee 
is  also  precluded  from  setting  up,  as  a  ground  for 
recovering  a  payment,  that  the  drawer's  signature 
was  forged. 

74.  SIGNATURE  OF  UNAUTHORIZED 
AGENT. — In  that  respect  the  case  of  forgery  is 
different  from  another  case  of  lack  of  genuineness, 
namely,  where  the  instrument  was  made  by  an  agent 
without  authority.  The  principal  may  ratify  the 
act  of  an  agent  without  authority,  and  this  ratifica- 
tion is  good  without  consideration  and  without  any 
reliance  or  change  of  position.  Accordingly,  if  the 
purchaser  of  a  note  which  purports  to  be  made  by  A 
through  an  agent,  asks  A,  after  having  purchased 
the  note,  "Was  that  agent  authorized  to  sign  this?" 
and  A  says  either,  "Yes,  he  was,"  or,  "No,  he 


NEGOTIABLE  INSTRUMENTS  57 

wasn't,  but  I  ratify  his  act,"  A  will  be  bound  just  as 
much  as  though  he  had  made  those  statements  be- 
fore the  purchaser  bought  the  note  and  the  pur- 
chaser had  bought  in  reliance  on  the  statement. 

75.  SIGNATURE  OF  UNAUTHORIZED 
CORPORATION  OR  OFFICER.— Another  kind^ 
of  lack  of  authority  which  also  prevents  an  instru- 
ment from  being  genuine  is  where  a  corporation 
makes  a  note  without  authority.  It  may  be  that  the 
corporation  itself  had  no  authority  to  make  a  note, 
that  it  was  ultra  vires  in  legal  phraseology.  Or  it 
may  be  that  though  the  corporation  had  power  to 
make  a  note,  the  particular  officer  who  attempted  to 
bind  the  corporation  did  not  have  power  to  do  so. 
In  either  case  the  corporation  is  not  bound.  There 
is  an  absolute  defence,  unless  here  also  the  corpora- 
tion is  precluded  from  setting  up  the  defence  by 
having  induced  a  purchaser  to  believe  that  there 
was  sufficient  authority,  and  even  if  the  corporation 
does  induce  a  purchaser  to  believe  there  was  auth- 
ority, it  cannot  exceed  the  limits  imposed  upon  it  by 
its  charter.  A  business  corporation  in  general  would 
have  power  to  issue  negotiable  paper,  but  some 
kinds  of  corporations  would  not. 

76.  FORGED  INDORSEMENT.— The  com- 
monest case  where  the  holder  has  difficulty  in  mak- 
ing out  title  is  where  some  indorsement  is  forged. 
It  does  not  matter  which  indorsement  if  all  are 
special  indorsements.  If  any  one  is  forged  there 
can   be   no   recovery.     Suppose   this   case,   how- 


58  NEGOTIABLE  INSTRUMENTS 

ever:  an  instrument  payable  to  A  or  order  is  in- 
dorsed in  blank  by  A,  then  there  is  a  forged  special 
indorsement  to  B,  and  subsequently  a  genuine  in- 
dorsement of  B  to  C.  C  can  recover  on  that  instru- 
ment because  he  can  fill  in  his  own  name  over  the 
blank  indorsement  and  strike  out  the  subsequent 
indorsements.  (Section  48.)  Contrast  with  that 
case  this:  an  instrument  payable  to  A  or  order  in- 
dorsed in  blank  by  A  and  then  specially  indorsed  by 
a  genuine  indorsement  of  the  holder  to  B.  B's  in- 
dorsement is  forged  and  then  the  instrument  comes 
into  the  hands  of  C,  a  bona  fide  purchaser.  In  this 
case  C  cannot  collect.  He  cannot  write  his  name 
over  the  blank  indorsement  here  because  the  subse- 
quent genuine  special  indorsement  restricts  the  ne- 
gotiability of  the  paper,  and  it  is  necessary  that 
there  shall  be  a  genuine  indorsement  from  B  in 
order  to  transfer  title.  In  the  first  case  the  special 
indorsement  being  forged  did  not  restrict  the  effect 
of  the  blank  indorsement.  If  a  payment  is  actually 
made  on  an  instrument  to  one  whose  right  is  derived 
through  a  forged  indorsement,  the  payment  may 
be  recovered.  The  case  is  different  from  that  of  a 
forged  drawing.  We  have  seen  in  paragraph  31 
that  the  drawee  in  that  case  cannot  recover  back 
what  he  pays,  but  if  the  drawee  pays  an  instrument 
to  one  who  claims  under  a  forged  indorsement,  he 
can  recover  his  money  back  even  from  an  innocent 
holder.  The  reason  for  the  difference  is  that  in  the 
foreed  indorsement  case  the  holder  did  not  own  the 


NEGOTIABLE  INSTRUMENTS  59 

instrument  which  was  paid.  The  payment  was  due 
to  somebody  else.  In  the  case  of  the  forged  draw- 
ing the  holder  who  presented  that  draft  had  a  poor 
thing,  but  it  was  his  and  if  the  drawee  chose  to 
honor  it  that  was  the  drawee's  lookout. 

Article  II — Consideration 

77.  SECTION  24.— [PRESUMPTION  OF 
CONSIDERATION.]  Every  negotiable  instru- 
ment is  deemed  prima  facie  to  have  been  issued  for 
a  valuable  consideration;  and  every  person  whose 
signature  appears  thereon  to  have  become  a  party 
thereto  for  value. 

78.  CONSIDERATION  IN  NEGOTIABLE 
INSTRUMENTS  AS  COMPARED  WITH 
THAT  IN  OTHER  CONTRACTS.— The  rule 
stated  in  this  section  differs  from  that  which  pre- 
vails  in  regard  to  simple  contracts  at  common  law. 
In  regard  to  such  contracts  the  rule  was  and  still  is 
in  most  States  that  even  in  case  of  a  written  con- 
tract which  is  not  under  seal,  the  promisee  when 
suing  the  promisor  must  allege  and  prove  sufficient 
consideration  to  support  the  promise;  nothing  is 
presumed  in  the  promisee's  favor.  In  a  few  juris- 
dictions this  rule  has  been  changed  in  regard  to  all 
written  contracts  making  the  rule  similar  in  regard 
to  such  contracts  with  that  stated  in  Section  24  of 
the  negotiable  instruments  law.  Though  considera- 
tion is  presumed  prima  facie  to  have  been  given  for 
every  obligation  on  a  negotiable  instrument,  the 


60  NEGOTIABLE  INSTRUMENTS 

truth  may  be  shown  by  any  party,  and  if  when 
shown  it  appears  that  no  value  or  consideration  in 
fact  existed,  the  defence  will  be  good  as  against  any 
one  but  a  holder  in  due  course. 

79.  SECTION  25.  —  [CONSIDERATION, 
WHAT  CONSTITUTES.]  Value  is  any  consid- 
eration sufficient  to  support  a  simple  contract.  An 
antecedent  or  pre-existing  debt  constitutes  value; 
and  is  deemed  such  whether  the  instrument  is  pay- 
able on  demand  or  at  a  future  time. 

NOTE. — In  the  Wisconsin  Act  the  words  "discharged, 
extinguished  or  extended"  are  inserted  after  the  word 
"debt,"  and  at  the  end  of  the  section  is  added:  "But  the 
indorsement  or  deHvery  of  negotiable  paper  as  collateral 
security  for  a  pre-existing  debt,  without  other  considera- 
tion, and  not  in  pursuance  of  an  agreement  at  the  time  of 
delivery,  by  the  maker,  does  not  constitute  value," 

80.  WHAT  IS  SUFFICIENT  CONSIDERA- 
TION IN  SIMPLE  CONTRACTS.— As  to  what 
is  consideration,  the  rules  of  negotiable  paper  are  in 
general  identical  with  those  of  simple  contracts,  and 
it  is,  therefore,  necessary  to  define  briefly,  what  con- 
sideration is  necessary  to  make  a  simple  contract 
binding — that  is,  what  is  necessary  to  make  an  ordi- 
nary promise  legally  enforceable  as  a  contract.  The 
promisee  must  give  something  or  promise  to  give 
something  to  the  promisor  in  exchange  for  his 
promise  which  he  has  assented  to  receive  as  the 
price  for  his  promise;  and  the  thing  so  given  or 
promised  as  consideration  must  be  something  to 
which  the  promisor  was  not  previously  entitled. 
Doing  or  promising  to  do  something  which  one  was 


NEGOTIABLE  INSTRUMENTS  61 

previously  legally  bound  to  do  is  not  sufficient  con- 
sideration. The  thing  given  or  promised  as  con- 
sideration need  not,  however,  be  tangible,  it  may  be 
the  surrender  of  a  right  or  the  forbearance  to  en- 
force a  claim;  but  the  surrender  of  a  claim  known 
to  be  invalid  or  the  forbearance  to  prosecute  a  claim 
known  to  be  unfounded  is  insufficient. 
81.  SATISFACTION  OF  AN  ANTECEDENT 
DEBT  IS  SUFFICIENT  CONSIDERATION.— 
There  are  some  differences,  however,  between  the 
rules  of  consideration  for  negotiable  paper  and  for 
ordinary  simple  contracts.  In  the  first  place,  a  ne- 
gotiable instrument  may  be  given  for  an  antecedent 
or  pre-existing  debt.  That  is  not  so  in  the  case  of 
simple  contracts.  When  we  owe  a  debt  and  say 
verbally,  "We  promise  to  pay  that,"  or  make  such  a 
promise  in  writing,  we  could  not  be  sued  on  the 
promise.  The  old  obligation,  of  course,  still  exists, 
but  the  new  promise  creates  no  new  liability,  be- 
cause nothing  new  is  given  in  exchange  for  it.  But 
in  the  case  of  a  negotiable  instrument,  if  there  is  an 
antecedent  debt,  the  antecedent  debt  may  be  paid  or 
may  be  secured  by  a  negotiable  instrument,  and  the 
negotiable  instrument  creates  an  immediate  new 
obligation. 

82.  CONSIDERATION  NEED  NOT  MOVE 
FROM  THE  PROMISEE  TO  THE  PROMISOR. 
— There  is  another  difference.  In  simple  contracts 
the  consideration  must  ordinarily  move  from  the 


62  NEGOTIABLE  INSTRUMENTS 

promisee  to  the  promisor.  It  is  something  the 
promisee  gives  for  the  promise.  That  is  not  neces- 
sarily true  in  negotiable  paper.  In  order  to  make  a 
promise  binding  on  a  negotiable  instrument  it  is 
essential  either  that  the  promisee  shall  have  parted 
,  with  something  or  that  the  promisor,  the  obligor  on . 
the  instrument,  shall  have  received  something;  but 
it  is  not  essential  that  both  shall  concur.  The 
promisee  need  not  have  given  something  to  the 
obligor.  Let  us  give  an  illustration:  A  wishes  to 
pay  C's  claim  against  B,  and  A  accordingly  gives  C 
his  (A's)  note  in  satisfaction  of  C's  claim  against 
B.  A  has  bound  himself  by  that  instrument  though 
he  has  received  nothing.  C  has  given  up  some- 
thing, his  claim  against  B,  and  that  is  enough.  Also, 
you  may  have  a  case  where  A,  the  maker,  receives 
something,  as  where  he  at  the  request  of  B,  to  whom 
he  owes  money,  gives  a  note  for  the  amount  to  C  in- 
stead of  to  B,  who  wishes  to  make  C  a  present  of 
the  note.  There  A  has  received  something,  since 
he  has  been  discharged  from  the  claim  that  B  had 
against  him,  but  C,  who  holds  that  note,  has  given 
nothing  for  it.  Yet  he  can  recover  on  it.  To  re- 
peat, then,  if  either  the  obligor  has  received  some- 
thing or  the  holder  has  given  something  there  is 
sufficient  value  or  consideration  for  a  negotiable  in- 
strument. 

83.  SECTION  26.— [WHAT  CONSTITUTES 
HOLDER  FOR  VALUE.]  Where  value  has  at 
any  time  been  given  for  the  instrument,  the  holder 


NEGOTIABLE  INSTRUMENTS  63 

is  deemed  a  holder  for  value  in  respect  to  all  parties 
who  became  such  prior  to  that  time. 

84.  CONSIDERATION  ONCE  EXISTING 
MAKES  OBLIGATION  PERMANENT.— A  fur- 
ther feature  of  consideration  in  negotiable  instru- 
ments is  that  if  an  instrument  has  once  become 
binding,  or  if  an  obligation  on  an  instrument  has 
become  binding,  because  the  obligor  has  received 
value  or  a  holder  has  given  value,  lack  of  considera- 
tion in  subsequent  transfers  is  immaterial,  so  far  as 
concerns  the  liability  of  parties  to  the  instrument 
at  the  time  when  value  was  given  or  received.  To 
illustrate:  A  wishes,  we  will  suppose  again,  to  pay 
a  debt  B  owes  to  C,  A  accordingly  gives  his  own 
note  to  C,  who  receives  it  in  payment.  Now  A  has 
received  nothing,  but  C  has  surrendered  his  claim 
again  B,  so  the  note  is  binding.  Suppose,  further, 
C  gives  that  note  to  D,  a  pure  gift.  D  now  has 
given  nothing  for  the  note  and  A  has  received 
nothing  for  his  promise  on  it,  and  yet  the  note  is 
binding  because  it  was  binding  in  C's  hands  and  D 
succeeds  to  C's  rights,  but  if  C  transferred  the  note 
to  D  by  indorsement  as  a  gift,  D  could  not  hold  C 
liable  as  indorser  for  no  value  was  ever  given  or 
received  for  that  indorsement. 

85.  SECTION  27.— [WHEN  LIEN  ON  IN- 
STRUMENT CONSTITUTES  HOLDER  FOR 
VALUE.]  Where  the  holder  has  a  lien  on  the  in- 
strument, arising  either  from  contract  or  by  impli- 
cation of  law,  he  is  deemed  a  holder  for  value  to  the 
extent  of  his  lien. 


64  NEGOTIABLE  INSTRUMENTS 

86.  PLEDGE  OF  AN  INSTRUMENT  SUB- 
JECT TO  A  PERSONAL  DEFENCE.  —  If 
a  negotiable  instrument  which  is  subject  to  an 
equity  is  pledged  as  security  for  a  debt,  the 
pledgee,  if  a  holder  in  due  course,  is  protected  to  the 
amount  of  his  advances.  The  following  case  will 
illustrate  the  law:  Suppose  the  maker  is  fraudu- 
lently induced  by  the  payee  to  sign  a  negotiable 
note  for  $1,000;  the  payee  transfers  this  note  to 
secure  a  note  of  his  own  for  $500  which  he  borrows 
from  the  transferee.  The  lender  if  he  took  the 
$1,000  note  in  good  faith  can  recover  $500  on  it,  but 
no  more.  Now  suppose  the  lender  subsequently 
advanced  a  further  sum  of  $200  on  the  faith  of  the 
$1,000  note.  If  this  further  advance  was  also  made 
in  good  faith  without  notice  of  the  fraud,  the  lender 
could  now  recover  $700  from  the  maker  of  the 
larger  note.  If,  however,  the  $200  was  advanced 
after  notice  of  the  fraud,  the  maker  could  recover 
only  the  $500  which  was  first  advanced,  as  he  was 
then  acting  in  good  faith,  but  could  not  recover  the 
later  advance. 

87.  SECTION  28.— [EFFECT  OF  WANT  OF 
CONSIDERATION.]  Absence  or  failure  of  con- 
sideration is  matter  of  defense  as  against  any  person 
not  a  holder  in  due  course;  and  partial  failure  of 
consideration  is  a  defence  pro  tanto,  whether  the 
failure  is  an  ascertained  and  liquidated  amount  or 
otherwise. 

88.  CONSIDERATION  NECESSARY  AS  TO 
EVERY  PARTY.— Though  it  is  assumed  until  the 


NEGOTIABLE  INSTRUMENTS  65 

contrary  is  shown  that  every  party  to  a  negotiable 
instrument  has  received  value  (Section  24)  yet  the 
truth  may  be  shown  (Section  28)  and  if  in  fact  there 
was  no  value  or  consideration  the  obligation  cannot 
be  enforced  by  any  one  except  a  holder  in  due 
course,  and  in  dealing  with  the  subject  of  considera- 
tion it  must  be  remembered  that  each  party  is  to  be 
considered  separately  with  reference  to  that  point. 
There  may  be  consideration  so  far  as  a  maker  of  a 
note  is  concerned,  but  none  so  far  as  an  indorser  is 
concerned ;  for  instance,  if  a  maker  borrowed  money 
and  subsequently  the  bank  from  which  the  money 
was  borrowed  got  another  person  to  indorse,  the 
maker  would  have  received  consideration  and  the 
note  would  be  binding  as  against  him,  but  it  would 
not  be  binding  as  against  the  indorser.  If,  how- 
ever, the  indorser  received  consideration  later  when 
he  put  on  his  signature  he  also  would  be  bound ;  for 
instance,  if  the  note  had  become  due  and  the  bank 
said  that  it  might  lie  awhile  unpaid  if  the  maker 
would  get  an  indorser,  and  the  indorser  came  in  and 
indorsed  in  consideration  of  the  bank's  forbearing 
to  enforce  the  note  for  a  time,  that  would  be  enough 
to  make  the  indorser  also  liable. 

89.  THE  SAME  CONSIDERATION  MAY 
SUPPORT  SEVERAL  PROMISES.— Although 
there  must  be  consideration  for  the  promise  of  each 
party,  or  he  will  not  be  bound,  the  same  considera- 
tion may  serve  for  several  promises;  for  instance,  if 
a  bank  says  it  will  lend  money  on  a  note  with  two 


66  NEGOTIABLE  INSTRUMENTS 

indorsers,  and  it  does  lend  money  on  such  a  note, 
the  money  lent  is  a  consideration  not  only  for  the 
maker's  obligation  but  for  the  obligation  of  each 
indorser.  The  bank  demanded  the  price  of  several 
obligations  for  its  one  loan,  and  that  one  loan  was 
consideration  for  all. 

90.  SECTION  29.— [LIABILITY  OF  ACCOM- 
MODATION PARTY.]  An  accommodation 
party  is  one  who  has  signed  the  instrument  as 
maker,  drawer,  acceptor,  or  indorser,  without  re- 
ceiving value  therefor,  and  for  the  purpose  of  lend- 
ing his  name  to  some  other  person.  Such  a  person 
is  liable  on  the  instrument  to  a  holder  for  value,  not- 
withstanding such  holder  at  the  time  of  taking  the 
instrument  knew  him  to  be  only  an  accommodation 
party. 

NOTE. — In  the  Illinois  Act  the  words  "without  receiv- 
ing value  therefor"  are  omitted  and  at  the  end  of  the  section 
is  added,  "and  in  case  a  transfer  after  maturity  was  intend- 
ed by  the  accommodating  party  notwithstanding  such 
holder  acquired  title  after  maturity." 

91.  ACCOMMODATION  SIGNATURES.— Of 
course  lack  of  consideration  is  always  a  defence  to 
an  accommodation  signature  so  long  as  the  paper 
signed  has  not  been  transferred  to  some  one  who 
has  given  value  for  it.  The  name  "accommodation 
signer"  signifies  that  he  has  received  no  value  for 
his  signature,  and  unless  the  instrument  gets  into 
the  hands  of  some  holder  who  pays  something  there 
would  be  neither  value  received  by  the  accommo- 
dating obligor  nor  value  given  by  the  holder.  But 
as  soon  as  a  holder  for  value  comes  in,  then  you 


NEGOTIABLE  INSTRUMENTS  67 

have  the  necessary  element  of  consideration.  It 
will  not  then  make  any  difference  that  the  accom- 
modation party  received  nothing.  It  is  enough 
that  the  holder  has  given  something  for  the  instru- 
ment; and  it  does  not  matter  that  the  holder  when 
he  gave  the  value  knew  that  the  instrument  was  for 
accommodation.  That  is  not  knowledge  of  fraud 
or  of  any  impropriety. 

Article  III — Negotiation 

92.  SECTION  30.— [WHAT  CONSTITUTES 
NEGOTIATION.]  An  instrument  is  negotiated 
when  it  is  transferred  from  one  person  to  another  in 
such  manner  as  to  constitute  the  transferee  the 
holder  thereof.  If  payable  to  bearer  it  is  negotiated 
by  delivery;  if  payable  to  order  it  is  negotiated  by 
the  indorsement  of  the  holder  completed  by  delivery. 

93.  NEGOTIATION.— Having  considered  the 
liability  of  the  various  parties  to  negotiable  instru- 
ments, we  now  come  to  the  question  of  negotiation 
of  the  instruments.  They  may  be  negotiated  either 
by  indorsement  or,  if  payable  to  bearer,  by  delivery. 
In  considering  this  section  we  must  bear  in  mind 
that  under  the  definition  of  section  9,  other  instru- 
ments than  those  in  terms  made  payable  on  the  face 
to  bearer,  are  classified  under  the  law  as  payable  to 
bearer. 

94.  WHO  MAY  NEGOTIATE.— When  nego- 
tiation of  a  negotiable  instrument  is  by  delivery,  the 
delivery  may  be  by  anybody.    Even  a  thief  or  a 


68  NEGOTIABLE  INSTRUMENTS 

finder  can  make  an  effective  delivery  of  an  instru- 
ment payable  to  bearer,  so  that  a  holder  in  due 
course  v^^ill  get  an  indefeasible  title.  On  the  other 
hand,  if  an  instrument  is  payable  to  order,  the  in- 
dorsement must  be  by  the  person  entitled  to  the  in- 
strument; no  other  indorsement  will  do. 

95.  SECTION  31.— [INDORSEMENT;  HOW 
MADE.]  The  indorsement  must  be  written  on  the 
instrument  itself  or  upon  a  paper  attached  thereto. 
The  signature  of  the  indorser,  without  additional 
words,  is  a  sufficient  indorsement. 

NOTE. — In  the  Illinois  Act  the  following  words  are 
added  "and  the  addition  of  words  of  assignment  or  guar- 
anty shall  not  negative  the  additional  effect  of  the  signature 
as  an  indorsement,  unless  otherwise  expressly  stated." 

96.  EXPLANATION  OF  SECTION  31.— An 
acceptance  of  a  bill  of  exchange  is  the  only  obliga- 
tion on  negotiable  instruments  which  is  not  re- 
quired by  law  to  be  upon  the  instrument  itself.  It 
is  really  no  exception  to  this  rule  that  if  the  back  of 
an  instrument  is  covered  already  with  indorsements, 
a  piece  of  paper  called  an  allonge  may  be  attached 
to  the  paper  and  further  endorsements  written  upon 
that. 

97.  SECTION  32.— [INDORSEMENT  MUST 
BE  OF  ENTIRE  INSTRUMENT.]  The  indorse- 
ment must  be  an  indorsement  of  the  entire  instru- 
ment. An  indorsement  which  purports  to  transfer 
to  the  indorsee  a  part  only  of  the  amount  payable, 
or  which  purports  to  transfer  the  instrument  to  two 
or  more  indorsees  severally,  does  not  operate  as  a 
negotiation  of  the  instrument.    But  where  the  in- 


NEGOTIABLE  INSTRUMENTS  69 

strument  has  been  paid  in  part,  it  may  be  indorsed 
as  to  the  residue. 

98.  EXPLANATION  OF  SECTION  32.— A 
writing  on  the  back  of  a  negotiable  instrument 
which  purported  to  be  an  indorsement  of  part  of  it 
would  not  be  wholly  ineffectual  but  it  would  not 
negotiate  the  instrument  or  itself  be  negotiable.  It 
would  amount  to  a  common  law  assignment  of  a 
portion  of  the  holder's  rights  under  the  instrument; 
and  as  this  assignment  would  be  written  on  the  in- 
strument itself,  any  holder  who  took  the  instrument 
would  have  notice  of  the  assignment,  and  be  bound 
to  respect  it.  The  only  important  limitation,  there- 
fore, on  the  rights  of  one  to  whom  the  holder  pur- 
ports to  indorse  a  part  of  the  instrument  is  that  he 
would  not  be  given  the  privileges  of  a  holder  in  due 
course.  Like  any  assignee  of  a  chose  in  action 
(that  is  a  contract  right)  he  would  be  subject  to  all 
personal  defences  or  equities  which  prior  parties  to 
the  instrument  might  have. 

99.  SECTION  33.— [KINDS  OF  INDORSE- 
MENT.] An  indorsement  may  be  either  special  or 
in  blank;  and  it  may  also  be  either  restrictive  or 
qualified,  or  conditional. 

100.  KINDS  OF  INDORSERS.— The  next  per- 
son whose  liability  is  to  be  considered  is  the  indor- 
see An  indorsement  must  be  written  on  the  instru- 
ment itself  or  on  a  paper  attached  thereto.  A  writ- 
ing on  a  detached  paper  cannot  be  an  indorsement. 
(Section  31.)     Normally  the  payee  is  the  first  in- 


70  NEGOTIABLE  INSTRUMENTS 

dorser.  The  several  kinds  of  indorsement  are  enu- 
merated in  Section  33,  with  one  addition  which  is 
defined  in  Section  64.  The  statute  says  an  indorse- 
ment may  be  either  special  or  in  blank;  it  may  be 
restrictive,  qualified  or  conditional.  The  additional 
kind  may  be  called  an  anomalous  or  irregular  in- 
dorsement. The  meaning  of  a  special  indorsement 
as  distinguished  from  an  indorsement  in  blank  is,  of 
course,  plain.  The  indorsement  in  blank  in  effect 
makes  the  instrument  payable  to  bearer.  The  spe- 
cial indorsement  defined  in  the  following  section 
makes  necessary  the  signature  of  the  special  in- 
dorsee for  further  negotiation.  A  blank  indorse- 
ment may  be  converted  by  any  holder  into  a  special 
indorsement  by  writing  over  the  indorser's  signa- 
ture the  name  of  the  indorsee  desired.  An  indorse- 
ment is  an  order.  It  is  sometimes  said  to  be  the 
drawing  of  a  new  bill  on  the  drawee  or  maker;  at 
any  rate,  it  is  an  order  on  him.  The  full  form  of 
indorsement  is,  "Pay  to  the  order  of,"  just  the  words 
the  drawer  of  an  instrument  uses,  and  the  person 
ordered  to  pay  is  the  drawee  or  maker.  Though  this 
prder  does  not  say  so  in  terms,  by  mercantile  cus- 
tom it  operates  as  an  assignment  or  transfer  of  the 
instrument,  and  also  operates  to  create  an  obliga- 
tion to  pay  the  indorsed  instrument,  if  dishonored 
by  the  primary  party,  on  receiving  due  notice  of  the 
dishonor.  Ordinarily,  words  of  assignment  on  the 
back  of  a  negotiable  instrument  will  not  amount  to 
an  unqualified  indorsement.    Nor  can  an  indorse- 


NEGOTIABLE  INSTRUMENTS  71 

ment  be  partial  (Section  32).    It  must  always  relate 
to  the  entire  instrument  (Section  32). 

101.  SECTION  34.— [SPECIAL  INDORSE- 
MENT; INDORSEMENT  IN  BLANK.]  A  spe- 
cial indorsement  specifies  the  person  to  whom,  or  to 
whose  order,  the  instrument  is  to  be  payable;  and 
the  indorsement  of  such  indorsee  is  necessary  to  the 
further  negotiation  of  the  instrument.  An  indorse- 
ment in  blank  specifies  no  indorsee,  and  an  instru- 
ment so  indorsed  is  payable  to  bearer,  and  may  be 
negotiated  by  delivery. 

102.  COMMENT  ON  SECTION  34.— The  def- 
inition of  a  special  indorsement  is  familiar  to  every- 
one. The  provision  that  an  indorsement  in  blank  is 
payable  to  bearer  is  repeated  from  Section  9  (5). 

103.  SECTION  35.— [BLANK  INDORSE- 
MENT; HOW  CHANGED  TO  SPECIAL  IN- 
DORSEMENT.] The  holder  may  convert  a  blank 
indorsement  into  a  special  indorsement  by  writing 
over  the  signature  of  the  indorser  in  blank  any  con- 
tract consistent  with  the  character  of  the  indorse- 
ment. 

104.  COMMENT  ON  SECTION  35.— Though 
an  instrument  endorsed  in  blank  is  payable  to 
bearer,  any  holder  by  writing  a  special  endorsement 
over  the  signature  deprives  the  instrument  of  its 
character;  it  will  then  become  subject  to  the  rules 
of  order  paper. 

105.  SECTION  36.— [WHEN  INDORSE- 
MENT RESTRICTIVE.]  An  indorsement  is  re- 
strictive, which  either, — 


72  NEGOTIABLE  INSTRUMENTS 

(1)  Prohibits  the  further  negotiation  of  the  in- 
strument ;  or 

(2)  Constitutes  the  indorsee  the  agent  of  the  in- 
dorser ;  or 

(3)  Vests  the  title  in  the  indorsee  in  trust  for  or 
to  the  use  of  some  other  person. 

'    But  the  mere  absence  of  words  implying  power  to 
negotiate  does  not  make  an  indorsement  restrictive. 

106.  COMMENT  ON  SECTION  36.— This  enu- 
meration of  what  constitutes  a  restrictive  indorse- 
ment is  self-explanatory.  The  more  troublesome 
matter  of  the  effect  of  restrictively  indorsing  is 
dealt  with  in  the  next  section. 

107.  SECTION  37.— [EFFECT  OF  RE- 
STRICTING INDORSEMENT;  RIGHTS  OF 
INDORSEE.]  A  restrictive  indorsement  confers 
upon  the  indorsee  the  right, —  (1)  To  receive  pay- 
ment of  the  instrument;  (2)  To  bring  any  action 
thereon  that  the  indorser  could  bring;  (3)  To  trans- 
fer his  rights  as  such  indorsee,  where  the  form  of  the 
indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title 
of  the  first  indorsee  under  the  restrictive  indorse- 
ment. 

NOTE. — In  the  Illinois  Act  the  following  words  are  added 
to  subsection  2 :  "or  except  in  the  case  of  a  restrictive  in- 
dorsement specified  in  section  36 — subsection  2 — any  action 
against  the  indorser  or  any  prior  party  that  a  special  in- 
dorsee would  be  entitled  to  bring."  Subsection  3  reads  as 
follows:  "(3)  To  transfer  the  instrument,  where  the  form 
of  the  indorsement  authorizes  him  to  do  so"  and  at  the  end 
of  the  section  is  added:  "specified  in  section  36 — subsection 
1 — and  as  against  the  principal  or  cestui  que  trust  only  the 
title  of  the  first  indorsee  under  the  restrictive  indorsement 
specified  in  section  36-«-subsections  2  and  3  respectively." 


NEGOTIABLE  INSTRUMENTS  73 

108.  INDORSEMENT  FOR  COLLECTION. 

— The  commonest  case  of  a  restrictive  indorsement 
is  an  indorsement  for  collection.  Such  an  indorse- 
ment vests  the  indorsee  with  title  and  a  right  to 
bring  any  action  the  indorser  could  bring,  and  en- 
ables the  indorsee  to  transfer  his  rights  to  another ; 
but  the  person  to  whom  the  instrument  is  thus  trans- 
ferred by  the  restrictive  indorsee  will  also  be  re- 
stricted to  the  same  extent ;  that  is,  if  an  indorsee  of 
paper  for  collection  transfers  it  to  somebody  else, 
that  subsequent  transferee  is  also  restricted  and 
holds  the  instrument  for  collection. 

109.  SECTION  38.  —  [9UALIFIED  IN- 
DORSEMENT.] A  qualified  indorsement  consti- 
tutes the  indorser  a  mere  assignor  of  the  title  to  the 
instrument.  It  may  be  made  by  adding  to  the  in- 
dorser's  signature  the  words  "without  recourse"  or 
any  words  of  similar  import.  Such  an  indorsement 
does  not  impair  the  negotiable  character  of  the  in- 
strument. 

110.  COMMENT  ON  SECTION  38.— A  quali- 
fied indorsement  is  defined  in  Section  38  of  the  Act 
as  constituting  the  indorser  a  mere  assignor.  It 
does  not  follow  that  the  indorsee  is  a  mere  assignee, 
who  takes  subject  to  equities.  The  final  sentence  of 
the  section  indicates  that  the  indorsee  if  a  holder  in 
due  course  will  take  free  from  equities.  The  ordi- 
nary way  of  making  a  qualified  indorsement  is  by 
adding  the  words,  "without  recourse,"  but  the 
words,  "I  hereby  transfer  and  assign  all  my  rights, 
title  and  interest  in  and  lQ_the  within  note,"  have 


74  NEGOTIABLE  INSTRUMENTS 

also  been  held  a  qualified  indorsement,  and  in  effect 
an  assignment  of  the  instrument,  without  creating 
any  obligation  on  the  part  of  the  indorser  to  pay  the 
instrument  if  dishonored  by  the  party  primarily 
liable. 

111.  SECTION  39.— [CONDITIONAL  IN- 
DORSEMENT.] Where  an  indorsement  is  condi- 
tional, a  party  required  to  pay  the  instrument  may 
disregard  the  condition,  and  make  payment  to  the 
indorsee  or  his  transferee,  whether  the  condition 
has  been  fulfilled  or  not.  But  any  person  to  whom 
an  instrument  so  indorsed  is  negotiated,  will  hold 
the  same,  or  the  proceeds  thereof,  subject  to  the 
rights  of  the  person  indorsing  conditionally. 

112.  ILLUSTRATION  OF  CONDITIONAL 

INDORSEMENTS.— A  conditional  indorsement 
is  not  commonly  seen.  An  illustration  of  one  would 
be  an  indorsement  which  reads,  "Pay  to  the  order 
of  X  Y  if  A  B  goes  into  bankruptcy,"  or  one  which 
is  subject  to  any  other  condition.  It  might  be 
thought  such  an  indorsement  would  be  invalid  alto- 
gether, but  the  statute  provides  that  the  party  pri- 
marily liable  on  such  an  instrument  may  either  dis- 
regard the  condition  or  recognize  it ;  but  if  the  con- 
dition is  disregarded  and  payment  made  though  the 
condition  has  not  happened,  the  person  who  re- 
ceives payment  will  hold  it  subject  to  the  condition. 
In  the  case  we  put  where  the  instrument  was  in- 
dorsed to  X  Y  if  A  B  becomes  bankrupt,  the  maker 
of  the  instrument  might  pay  X  Y  safely,  whether 
A  B  becomes  bankrupt  or  not,  but  X  Y  would  have 


NEGOTIABLE  INSTRUMENTS  75 

to  hold  that  payment  in  trust  for  the  person  from 
whom  he  received  the  instrument,  unless  A  B  did 
in  fact  become  bankrupt. 

113.  SECTION  40.— [INDORSEMENT  OF 
INSTRUMENT  PAYABLE  TO  BEARER.] 
Where  an  instrument,  payable  to  bearer,  is  indorsed 
specially,  it  may  nevertheless  be  further  negotiated 
by  delivery;  but  the  person  indorsing  specially  is 
liable  as  indorser  to  only  such  holders  as  make  title 
through  his  indorsement. 

NOTE. — The  Illinois  Act  instead  of  the  words  "payable 
to  bearer,"  are  the  words  "originally  payable  to  or  indorsed 
specially  to  bearer." 

1 14.  COMMENT  ON  SECTION  40.— We  have 
previously  considered  under  Section  9,  the  effect  of 
this  section  in  connection  with  Section  9  (5). 

115.  SECTION  41.  —  [INDORSEMENT 
WHERE  PAYABLE  TO  TWO  OR  MORE  PER- 
SONS.] Where  an  instrument  is  payable  to  the 
order  of  two  or  more  payees  or  indorsees  who  are 
not  partners,  all  must  indorse,  unless  the  one  in- 
dorsing has  authority  to  indorse  for  the  others. 

116.  EXPLANATION  OF  SECTION  41.— 
Where  two  or  more  persons  own  property,  title  can 
only  be  transferred  when  all  agree  to  transfer  it. 
The  provisions  of  Section  41  simply  apply  this  to 
the  law  of  negotiable  paper;  and  the  exception  to 
the  general  rule  stated  in  Section  41  also  applies  to 
all  property,  subject,  however,  to  one  qualification. 
Partners  have  authority  to  act  for  one  another  and 
for  the  firm  in  the  firm  business.  Therefore,  under 
the  doctrines  of  agency,  one  partner  may  indorse 


76  NEGOTIABLE  INSTRUMENTS 

for  the  firm,  and  so  in  other  than  partnership  cases, 
if  one  payee  has  in  fact  authority  to  act  for  the 
others,  he  may  do  so.  The  single  qualification  to 
which  allusion  has  just  been  made  relates  to  trus- 
tees. One  trustee  can  not  delegate  power  to  an- 
other to  do  any  act  which  requires  the  exercise  of 
judgment;  therefore  though  one  trustee  might  au- 
thorize another  to  indorse  negotiable  paper  for  col- 
lection, he  could  not  transfer  by  way  of  sale  nego- 
tiable paper  belonging  to  the  trust,  even  though 
authorized  by  his  trustees  to  do  so.  The  signature 
of  all  would  be  necessary. 

117.  SECTION  42.— [EFFECT  OF  INSTRU- 
MENT DRAWN  OR  INDORSED  TO  A  PER- 
SON AS  CASHIER.]  Where  an  instrument  is 
drawn  or  indorsed  to  a  person  as  "Cashier"  or  other 
fiscal  officer  of  a  bank  or  corporation,  it  is  deemed 
prima  facia  to  be  payable  to  the  bank  or  corporation 
of  which  he  is  such  officer;  and  may  be  negotiated 
by  either  the  indorsement  of  the  bank  or  corpora- 
tion, or  the  indorsement  of  the  officer. 

118.  ILLUSTRATION.— Suppose  A  does  busi- 
ness as  the  Boston  Hat  Company  and  gets  a  check 
or  note  payable  to  the  Boston  Hat  Company.  Or- 
dinarily and  normally  he  would  indorse  that  in  the 
name  of  the  Boston  Hat  Company,  but  if  he  did  not 
want  to  do  so,  he  might  indorse  it  in  the  name  of 
A.  The  Boston  Hat  Company  is  the  name  under 
which  A  does  business.  It  is  a  business  designation 
of  A.  If  the  Boston  Hat  Company  were  really  a 
corporation,  then  the  instrument  would  have  to  be 


NEGOTIABLE  INSTRUMENTS  77 

indorsed  in  the  name  of  the  corporation,  for  the 
corporation  would  be  a  different  person  from  A,  al- 
though A  might  own  all  the  stock  in  the  corpora- 
tion; but  the  mere  designation  "the  Boston  Hat 
Company,"  if  there  is  no  corporation,  does  not  cre- 
ate a  separate  person.  The  Boston  Hat  Company 
is  A,  and  A  may  indorse,  since  he  is  the  real  payee 
and  holder. 

119.  INDORSEMENT  UNDER  NAME  DIF- 
FERING FROM  THAT  ON  INSTRUMENT.— 
What  if  an  instrument,  on  its  face  or  by  indorse- 
ment, is  made  payable  to  the  order  of  a  single 
woman  by  her  maiden  name  and  she  marries.  Her 
indorsement  in  her  married  name  is  all  right.  She 
is  the  owner  and  payee,  or  indorsee,  of  that  instru- 
ment and  can  give  a  good  title  in  her  own  name.  So 
if  a  person  changed  his  name  otherwise  than  by 
marriage  he  could  indorse  in  his  new  name  and 
transfer  title  to  negotiable  paper  which  was  payable 
to  or  indorsed  to  him  in  his  old  name.  He  naturally 
wouldn't  do  that;  he  would  seek  to  avoid  question 
by  using  the  name,  so  far  as  possible,  under  which 
he  was  designated  in  the  negotiable  paper,  but  he 
has  the  legal  power  to  use  his  real  name.  Some- 
times in  order  to  make  his  right  abundantly  clear, 
he  indorses  in  both  names. 

120.  INDORSEMENT  BY  ONE  HAVING 
NAME  IDENTICAL  TO  PAYEE'S.— On  the 
other  hand,  even  though  a  person  has  an  identical 
name  with  that  of  a  payee  or  indorsee  of  paper,  he 


78  NEGOTIABLE  INSTRUMENTS 

cannot  transfer  good  title  to  it  if  he  is  not  really  the 
person  intended  as  payee  or  indorsee.  Suppose  a 
check  is  payable  to  John  Smith,  and  by  mistake  it  is 
delivered  to  the  wrong  John  Smith,  and  we  will 
even  go  so  far  as  to  suppose  that  the  man  to  whom 
it  is  delivered  thinks  that  it  was  intended  for  him; 
still  his  indorsement  will  not  give  good  title  even  to 
a  holder  in  due  course,  nor  will  it  protect  a  bank 
which  pays  on  the  faith  of  it.  In  this  respect  the 
law  in  this  country  is  more  severe  than  the  English 
or  German  laws.  Both  the  English  and  German 
laws  protect  a  bank  which  pays  in  good  faith  an  in- 
strument apparently  regular  in  drawing  and  in- 
dorsing, even  though  the  indorsement  be  made  by 
the  wrong  person  or  be  forged. 

121.  IMPERSONATION.— We  may  suppose 
one  other  case  of  indorsement  where  the  indorser's 
name  is  not  apparently  that  on  the  face  of  the  in- 
strument. Suppose  X  comes  to  A  and  by  stating 
that  he  (X)  is  Y  (a  case  of  false  and  fraudulent  mis- 
representation) induces  A  to  give  him  (X)  a  check 
payable  to  Y.  It  is  generally  held  that  such  a  check 
is  really  payable  to  X  under  the  name  of  Y.  A  in- 
tended to  make  the  person  before  him  the  payee, 
although  he  thought  the  name  of  the  person  before 
him  was  Y  and  therefore  inserted  that  name.  Ac- 
cordingly, since  X  is  the  real  payee,  he  can  transfer 
a  title  to  that  instrument  by  indorsing  it  either  in- 
his  own  name  or  in  the  name  of  Y,  his  assumed 
name.    The  same  principles  would  be  applicable  if 


NEGOTIABLE  INSTRUMENTS  79 

an  instrument  was  specially  indorsed  to  X  under 
the  name  of  Y. 

122.  ASSUMED  OR  BUSINESS  NAMES.— A 
person  may  even  for  a  single  transaction  assume  a 
name  different  from  his  own,  and  if  the  instrument 
is  really  intended  to  be  made  payable  to  him  or  in- 
dorsed to  him,  he  has  a  title  which  he  can  transfer 
either  under  his  temporarily  assumed  name  or  under 
his  real  name.  If  one  calls  himself  John  Smith  and 
gets  a  check  in  that  form,  it  is  really  payable  to  him, 
and  he  may  transfer  title  to  it  by  any  name  that 
designates  him.  Section  42  of  the  Act  specifically 
refers  to  common  cases  of  this  sort  of  thing;  that 
is,  where  an  instrument  is  made  payable  to  the 
cashier  or  fiscal  agent  of  a  corporation.  There  the 
statute  says  that  prima  facie  the  instrument  is  to  be 
treated  as  payable  to  the  corporation  itself,  and  it 
may  be  indorsed  either  by  the  officer  or  by  the  cor- 
poration itself.  The  statute  does  not  say  so,  but 
we  presume  the  same  thing  would  be  true  the  other 
way  around.  Suppose  a  note  payable  to  the  bank  or 
fiscal  corporation  and  indorsed  in  the  name  of  the 
cashier  or  fiscal  officer,  as  a  check  payable  to  the  A 
bank  indorsed  "X  Y,  cashier  of  the  A  bank."  That 
indorsement  would  be  good.  That  is  a  sort  of  busi- 
ness designation  for  purpose  of  negotiating  paper 
of  the  A  bank.  It  is  equally  true  that  one  who 
signs  negotiable  paper  under  a  trade  or  assumed 
name  incurs  the  same  liability  as  if  he  signed  his 
own  name.    (Section  18.) 


80  NEGOTIABLE  INSTRUMENTS 

123.  SECTION  43.  —  [INDORSEMENT 
WHERE  NAME  IS  MISSPELLED,  ET  CET- 
ERA.] Where  the  name  of  a  payee  or  indorsee  is 
wrongly  designated  or  misspelled,  he  may  indorse 
the  instrument  as  therein  described,  adding,  if  he 
think  fit,  his  proper  signature. 

124.  EXPLANATION  OF  SECTION  43.— 
The  provisions  of  this  section  are  a  necessary  con- 
sequence of  the  previous  provision  allowing  a  man 
to  sign  a  negotiable  instrument  in  an  assumed  name. 
If  he  may  sign  in  an  assumed  name,  necessarily  he 
may  in  a  misspelled  name.  The  further  addition  of 
his  name  correctly  spelled  is  merely  for  the  purposes 
of  avoiding  confusion. 

125.  SECTION  44.— [INDORSEMENT  IN 
REPRESENTATIVE  CAPACITY.]  Where  any 
person  is  under  obligation  to  indorse  in  a  represen- 
tative capacity,  he  may  indorse  in  such  terms  as  to 
negative  personal  liability. 

126.  HOW  AN  AGENT  SHOULD  INDORSE. 
— As  we  have  seen,  the  signature  of  "A,  agent,"  im- 
poses personal  liability  on  A.  A  problem  therefore 
is  presented  to  an  agent  when  in  his  principal's  busi- 
ness he  receives  negotiable  paper  payable  to  him  as 
agent,  and  he  desires  to  discount  or  otherwise  nego- 
tiate it.  If  he  makes  an  indorsement  as  "A,  agent," 
he  will  subject  himself  to  personal  liability.  He 
must,  therefore,  negative  the  inference  that  he 
means  to  contract  personally.  Of  course,  he  can  do 
this  by  indorsing  without  recourse,  but  those  with 
whom  he  is  dealing  may  demand  an  indorsement 


NEGOTIABLE  INSTRUMENTS  81 

which  will  be  binding  as  an  obligation.  In  such  a 
case  he  should  indorse  so  as  to  bind  his  principal 
but  not  himself.  He  may  do  this  by  signing  his 
name  "on  behalf  of"  his  principal,  naming  the  latter 
or,  by  signing  the  principal's  name  "by"  himself  as 
agent.  Though  an  indorsement  in  the  latter  form 
does  not  follow  literally  the  terms  of  the  face  of  the 
instrument,  and  therefore  might  not  be  a  desirable 
one  for  a  bank  to  accept,  it  is  legally  sufficient. 

127.  SECTION  45.— [TIME  OF  INDORSE- 
MENT ;  PRESUMPTION.]  Except  where  an  in- 
dorsement bears  date  after  the  maturity  of  the  in- 
strument, every  negotiation  is  deemed  prima  facie 
to  have  been  effected  before  the  instrument  was 
overdue. 

128.  SECTION  46.— [PLACE  OF  INDORSE- 
MENT; PRESUMPTION.]  Except  where  the 
contrary  appears,  every  indorsement  is  presumed 
prima  facie  to  have  been  made  at  the  place  where 
the  instrument  is  dated. 

129.  IMPORTANCE  OF  PLACE  OF  IN- 
DORSEMENT.—The  place  of  indorsement  may 
be  important  in  deciding  whether  or  not  an  indorser 
is  liable.  For  instance,  in  a  recent  case  a  married 
woman  who  indorsed  for  accommodation  a  note 
dated  and  payable  in  New  York,  when  sued  on  her 
indorsement  sought  to  show  that  the  indorsement 
was  in  fact  made  in  New  York  and  was  invalid  un- 
der the  laws  of  that  State.  It  was  held  that  this 
could  not  be  shown  against  the  plaintiff,  a  holder 
in  due  course.    As  against  anybody  except  a  holder 


82  NEGOTIABLE  INSTRUMENTS 

in  due  course,  the  evidence  would  have  been  admis- 
sible. 

130.  SECTION  47.— [CONTINUATION  OF 
NEGOTIABLE  CHARACTER.]  An  instrument 
negotiable  in  its  origin  continues  to  be  negotiable 
until  it  has  been  restrictively  indorsed  or  discharged 
'by  payment  or  otherwise. 

13L  COMMENT  ON  SECTION  47.— Under 
this  section  a  negotiable  instrument  continues  to  be 
negotiable  after  maturity  as  well  as  before,  although 
as  appears  from  other  sections  of  the  Act,  the  rights 
and  obligations  of  the  parties  are  different  after 
maturity  from  what  they  are  before. 

132.  SECTION  48.— [STRIKING  OUT  IN- 
DORSEMENT.] The  holder  may  at  any  time 
strike  out  any  indorsement  which  is  not  necessary 
to  his  title.  The  indorser  whose  indorsement  is 
struck  out,  and  all  indorsers  subsequent  to  him,  are 
thereby  relieved  from  liability  on  the  instrument. 

133.  ILLUSTRATIONS  OF  THE  FOREGO- 
ING RULE. — The  commonest  application  of  the 
rule  enacted  in  this  section  is  where  one  who  has 
indorsed  a  negotiable  instrument  which  has  there- 
after been  in  other  hands  and  indorsed  by  others, 
takes  it  up  and  desires  to  get  payment  from  prior 
parties  to  the  instrument.  If  he  were  obliged  to 
trace  his  present  title  fully  he  would  have  to  prove 
every  indorsement  subsequent  as  well  as  prior  to 
his  own ;  but  as  the  subsequent  indorsements  are  of 
no  interest  to  him,  since  he  cannot  exact  payment 
from  a  party  to  the  instrument  who  is  subsequent 


NEGOTIABLE  INSTRUMENTS  83 

to  himself,  he  may  strike  out  the  subsequent  in- 
dorsements and  establish  a  chain  of  title  merely  to 
his  first  holding  of  the  instrument.  By  operation  of 
law  he  is  remitted  to  the  same  position  which  he 
originally  occupied.  Or  we  may  suppose  before  the 
instrument  ever  came  into  his  hands  there  were  sev- 
eral indorsements  upon  it,  the  first  of  which  was  a 
blank  indorsement.  On  taking  up  the  instrument  he 
may  write  over  the  blank  indorsement  a  special  in- 
dorsement to  himself,  and  strike  out  all  later  in- 
dorsements. In  this  case,  however,  he  is  releasing 
from  liability  indorsers  whom  he  might  have 
charged  since  their  names  were  on  the  instrument 
before  he  became  a  holder.  Therefore  he  will  not 
adopt  the  course  suggested  unless  he  is  sure  of  be- 
ing able  to  get  reimbursement  from  parties  to  the 
instrument  prior  to  those  whose  names  are  struck 
out. 

134.  SECTION  49.— [TRANSFER  WITH- 
OUT INDORSEMENT;  EFFECT  OF.]  Where 
the  holder  of  an  instrument  payable  to  his  order 
transfers  it  for  value  without  indorsing  it,  the  trans- 
fer vests  in  the  transferee  such  title  as  the  trans- 
feror had  therein,  and  the  transferee  acquires,  in  ad- 
dition, the  right  to  have  the  indorsement  of  the 
transferor.  But  for  the  purpose  of  determining 
whether  the  transferee  is  a  holder  in  due  course,  the 
negotiation  takes  effect  as  of  the  time  when  the 
indorsement  is  actually  made. 

NOTE. — In  the  Illinois  and  Missouri  Acts,  after  the 
word  "right,"  the  first  sentence  continues  as  follows:  "to 
enforce  the  instrument  against  one  who  signed  for  the  ac- 


84  NEGOTIABLE  INSTRUMENTS 

commodalion  of  his  transferor,  and  the  right  to  have  the  in- 
dorsement of  the  transferor,  if  omitted  by  accident  or  mis- 
take. But  for  the  purpose,"  etc.  In  the  Colorado  Act,  at 
the  end  of  the  first  sentence,  there  is  added,  "if  omitted  by 
mistake,  accident  or  fraud."  In  the  Wisconsin  Act,  at  the 
end  of  the  section,  there  is  added :  "When  the  indorsement 
was  omitted  by  mistake,  or  there  was  an  agreement  to  in- 
dorse made  at  the  time  of  the  transfer,  the  indorsement, 
when  made,  relates  back  to  the  time  of  the  transfer." 

135.  ILLUSTRATIONS  OF  CASES  OF 
TRANSFER. — Negotiable  paper  can  only  be  nego- 
tiated in  accordance  with  the  custom  of  merchants ; 
that  is,  if  payable  to  order  it  must  be  properly  in- 
dorsed; but  all  contract  rights  for  the  payment  of 
money  may  be  assigned  and  therefore  one  who 
transfers  order  paper  without  indorsement  is  the 
assignor  of  a  chose  in  action.  The  transferee  is  an 
assignee,  and  as  we  have  said  his  rights  differ  from 
those  of  an  indorsee  only  in  this  that  he  takes  sub- 
ject to  personal  defences  or  equities  in  favor  of  the 
maker  and  other  parties  bound  by  the  instrument.  It 
may  be  added  that  the  same  results  which  this  sec- 
tion enacts  for  the  transfer  of  the  paper  would  fol- 
low if  the  holder  of  the  paper  without  transferring  it 
merely  agreed  for  value  to  do  so;  with  this  excep- 
tion, however,  the  assignee  could  not  demand  pay- 
ment from  the  parties  bound  on  the  instrument  un- 
til he  secured  it  and  was  able  to  surrender  or  cancel 
it.  He  would,  however,  have  the  right  to  demand 
the  instrument  from  the  holder  who  had  agreed  to 
assign  it  to  him.  Until  he  actually  got  possession 
of  the  paper,  his  right  would  always  be  subject  to 


NEGOTIABLE  INSTRUMENTS  85 

be  cut  off  by  an  indorsement  by  the  assignor  to  a 
holder  in  due  course.  One  may  suppose  also  a 
transfer  with  delivery  but  without  indorsement  and 
without  value.  Such  a  transfer  would  operate  as  a 
valid  gift  irrevocable  by  the  transferor,  but  the 
donee  not  being  a  holder  in  due  course  would  be 
subject  to  any  defences  which  were  available  against 
his  donor. 

136.  SECTION  50.— [WHEN  PRIOR  PARTY 
MAY  NEGOTIATE  INSTRUMENT.]  Where 
an  instrument  is  negotiated  back  to  a  prior  party, 
such  party  may,  subject  to  the  provisions  of  this  act, 
reissue  and  further  negotiate  the  same.  But  he  is 
not  entitled  to  enforce  payment  thereof  against  any 
intervening  party  to  whom  he  was  personally  liable. 

137.  COMMENT  ON  SECTION  50.— If  a  party 
primarily  liable  becomes  a  holder  of  the  instrument 
at  or  after  maturity,  it  is  discharged  and  can  not  be 
reissued.  It  does  not  extinguish  an  instrument, 
however,  for  anybody  except  a  party  primarily  lia- 
ble to  become  the  holder  even  though  he  does  so 
after  maturity.  The  final  sentence  of  the  section 
expresses  a  result  that  has  been  established  in  order 
to  avoid  what  is  called  circuity  of  action;  it  is  cir-^ 
cuity  of  action  where  a  plaintiff  is  allowed  to  re- 
cover money  from  a  defendant  who  can  thereafter 
recover  it  back  from  him.  If  A  is  the  second  indor- 
ser  of  an  instrument,  and  after  two  subsequent  in- 
dorsements becomes  again  the  holder  of  the  instru- 
ment, if  he  were  allowed  to  sue  the  fourth  or  the 


86  NEGOTIABLE  INSTRUMENTS 

third  indorser  on  dishonor  of  the  instrument  by  the 
maker,  the  fourth  or  third  indorser  on  being  com- 
pelled to  pay,  could  recover  from  him  as  second 
indorser.  To  avoid  this  round-about  result,  the  law 
denies  a  recovery  by  the  holder  against  the  third 
and  fourth  indorsers  in  the  case  supposed. 

Article  IV— Rights  of  the  Holder 

138.  SECTION  51.— [RIGHT  OF  HOLDER 
TO  SUE;  PAYMENT.]  The  holder  of  a  negotia- 
ble instrument  may  sue  thereon  in  his  own  name 
and  payment  to  him  in  due  course  discharges  the 
instrument. 

139.  HOLDER  HAS  A  RIGHT  AGAINST 
EVERY  PARTY.— We  may  here  consider  the 
amount  which  the  holder  of  a  bill  or  note  may  re- 
cover upon  it  if  it  is  not  paid  at  maturity.  In  the 
first  place,  the  holder  has  a  right  against  every  party 
to  the  instrument  for  the  full  amount  of  it,  if  the 
parties  secondarily  liable  are  once  duly  charged; 
that  is,  on  a  note  for  $1,000,  the  holder,  having 
charged  the  indorsers,  may  sue  the  maker  and 
every  one  of  the  indorsers  for  $1,000  each,  and  get  a 
judgment  against  every  one  of  them  for  that 
amount.  He  will  then  try  to  collect  as  best  he  can. 
Of  course,  the  holder  cannot  actually  collect  on  his 
judgments  more  than  the  amount  due  him  and  keep 
it.  If  he  should  collect  anything  in  excess  of  that 
which  is  due  he  will  hold  the  excess  in  trust  for  the 
last  party  on  the  instrument. 


NEGOTIABLE  INSTRUMENTS  87 

140.  IT  IS  IMMATERIAL  WHAT  THE 
HOLDER  PAID  FOR  A  NOTE.— It  makes  no  dif- 
ference what  the  holder  paid  for  the  note.  If  he  is 
the  owner  of  it  and  a  holder  in  due  course  he  may 
recover  the  full  face  of  $1,000,  even  though  he 
bought  it  for  $500,  and  though  originally  it  was  ob- 
tained by  fraud  on  the  part  of  the  payee,  but  if  the 
price  paid  was  very  small,  it  is  often  some  evidence 
in  connection  with  other  circumstances  that  the  pur- 
chaser did  not  buy  in  good  faith — that  he  suspected 
if  he  did  not  know  that  there  was  something  wrong 
with  the  instrument. 

141.  SECTION  52.  —  [WHAT  CONSTI- 
TUTES A  HOLDER  IN  DUE  COURSE.]  A 
holder  in  due  course  is  a  holder  who  has  taken  the 
instrument  under  the  following  conditions:  (1) 
That  it  is  complete  and  regular  upon  its  face.  (2) 
That  he  became  the  holder  of  it  before  it  was  over- 
due, and  without  notice  that  it  had  been  previously 
dishonored,  if  such  was  the  fact.  (3)  That  he  took 
it  in  good  faith  and  for  value.  (4)  That  at  the  time 
it  was  negotiated  to  him  he  had  no  notice  of  any  in- 
firmity in  the  instrument  or  defect  in  the  title  of  the 
person  negotiating  it. 

NOTE. — In  the  Wisconsin  Act  there  is  the  further  sub- 
section: (5)  "That  he  took  it  in  the  usual  course  of  busi- 
ness." 

142.  IMPORTANCE  OF  BEING  A  HOLDER 
IN  DUE  COURSE.— As  we  have  seen  personal 
defences  are  not  good  against  a  holder  in  due  course 
(Section  57)  and  are  good  against  one  who  is  not  a 
holder  in  due  course  (Section  58).    It  is  therefore 


88  NEGOTIABLE  INSTRUMENTS 

vital  to  determine  when  a  holder  falls  within  this 
designation. 

143.  THE  INSTRUMENT  MUST  BE  COM- 
PLETE AND  REGULAR.— The  first  requisite  is 
that  the  instrument  is  complete  and  regular  on  its 
face.  That,  you  see,  makes  every  holder  chargeable 
with  what  appears  on  the  face  of  the  instrument.  If 
a  holder  does  not  in  fact  draw  the  inference  of  ir- 
regularity from  something  on  the  instrument  which 
really  shows  irregularity,  it  is  the  holder's  own 
fault.  He  is,  in  the  language  that  is  sometimes  used, 
chargeable  with  constructive  notice  of  whatever  ap- 
pears on  the  document  itself.  Thus  it  may  indicate 
from  its  form  that  a  fraud  is  being  perpetrated  on  a 
corporation  or  partnership  or  the  beneficiaries  of  a 
trust.  Furthermore,  the  instrument  must  be  com- 
plete when  negotiated,  in  order  to  entitle  one  to  the 
designation  of  a  holder  in  due  course.  That  to  some 
extent  changes  the  law  from  what  it  was  prior  to 
the  enactment  oi  the  Negotiable  Instruments  Law. 
No  one  who  takes  a  blank  check  can  now  be  a  holder 
in  due  course.  Of  course,  if  the  instrument  is  given 
with  authority  to  fill  it  out  in  a  certain  way,  one 
who  took  the  instrument  and  filled  it  out  in  that 
way  would  be  protected,  and  one  who  took  the  in- 
strument in  blank  and  himself  filled  it  out  in  accord- 
ance with  the  original  authority  would  be  protected 
(Section  14),  but  one  who  took  it  as  a  blank  instru- 
ment, relying  on  the  statement  of  the  payee  that  it 
might  be  filled  out  for  $1^000,  when  in  fact  the  orig- 


NEGOTIABLE  INSTRUMENTS  89 

inal  authority  was  only  to  fill  it  out  for  $100,  would 
not  be  able  to  collect  more  than  $100.  He  is  not  a 
holder  in  due  course,  and  is  bound  by  the  original 
authority  given  by  the  maker.  It  does  not,  how- 
ever, make  an  instrument  incomplete  and  irregular 
that  it  is  not  dated,  states  no  place  of  payment  or 
does  not  state  that  it  is  for  value  received.  (Sec- 
tion 6.) 

144.  KNOWLEDGE  THAT  BLANKS  HAVE 
BEEN  FILLED. — This  suggests  an  inquiry  as  to 
the  position  of  one  who  knows  that  the  instrument 
was  originally  issued  in  blank,  but  who  took  it  after 
the  blank  was  filled  in.  Generally  speaking,  notice 
of  any  defence  is  enough  to  prevent  one  from  being 
a  holder  in  due  course,  and  we  should  suppose  it 
would  be  so  here,  although  it  seems  a  pretty  harsh 
result.  Suppose  a  blank  check  is  brought  to  us  and 
the  payee  says  he  has  authority  to  fill  it  out  for 
$1,000,  and  he  does  so  and  then  offers  it  to  us  for 
$1,000.  When  we  take  it,  it  is  complete  and  regular 
on  its  face,  but  we  had  notice  that  it  was  not  so 
when  it  was  issued.  We  think  under  the  statute  it 
is  a  somewhat  doubtful  question  whether  one  who 
thus  took  that  instrument  could  be  called  a  holder 
in  due  course.  We  should  think  it  was  too  doubtful 
for  it  to  be  safe  to  take  it  in  spite  of  the  provision  in 
section  14  that  the  person  in  possession  of  a  nego- 
tiable instrument  wanting  in  any  material  particu- 
lar, has  a  prima  facie  authority  to  fill  up  the  blanks. 
One  may  then  ask,  what  would  be  the  position  of  a 


90  NEGOTIABLE  INSTRUMENTS 

bank  which  took  an  instrument,  a  check  from  the 
payee,  knowing  that  the  payee  had  just  filled  out  the 
blank  ?  We  think  the  answer  must  be  the  same  as  in 
the  case  where  the  check  is  purchased.  If  knowl- 
edge of  a  blank  space  is  a  notice  of  an  infirmity  in 
the  instrument,  it  would  seem  as  if  the  bank  ought 
not  to  pay  under  those  circumstances.  We  find  it 
hard  to  believe,  however,  that  a  bank  would  not  be 
protected  that  did  so. 

145.  A  HOLDER  IN  DUE  COURSE  MUST 
TAKE  BEFORE  MATURITY  AND  WITHOUT 
NOTICE  OF  PRIOR  DISHONOR.— A  second 
requisite  stated  in  Section  52  for  a  holder  in  due 
course  is  becoming  holder  before  the  instrument 
was  overdue  and  without  notice  that  it  had  been 
previously  dishonored,  if  such  was  the  fact.  The 
last  clause  refers  to  two  cases ;  first,  that  of  demand 
paper,  which  may  in  fact  have  been  presented  and 
dishonored  though  the  purchaser  has  no  reason  to 
suppose  so,  and  second  to  the  case  of  a  time  bill  of 
exchange  which  has  been  presented  before  maturity 
for  acceptance  and  acceptance  refused.  That  is  a 
dishonored  bill,  and  any  one  who  takes  it  with 
knowledge  of  that  fact  would  not  be  a  holder  in  due 
course ;  but  one  who  takes  it  in  ignorance  of  the  pre- 
vious dishonor  and  before  maturity  would  be  a 
holder  in  due  course. 

146.  GOOD  FAITH  AND  VALUE.— The  third 
requisite  of  Section  52  is  that  the  holder  must  have 
taken  in  good  faith  and  for  value.     Those  words 


NEGOTIABLE  INSTRUMENTS  91 

need  no  explanation  other  than  the  definition  of 
value,  previously  given,  and  a  statement  in  regard 
to  the  requirement  of  good  faith.  Good  faith  means, 
not  such  care  as  would  be  regarded  as  reasonable 
business  prudence,  but  simply  honest  belief  in  the 
validity  of  the  instrument,  however  careless  it  may 
have  been  to  have  such  an  honest  belief.  (Section 
56.) 

147.  NOTICE  OF  INFIRMITY.— The  fourth 
requisite  of  Section  52  is,  perhaps,  almost  necessarily 
included  in  the  one  just  referred  to, — that  of  good 
faith.  The  fourth  requisite  is  that  at  the  time  of 
negotiation,  the  holder  had  no  notice  of  any  infir- 
mity of  the  instrument  or  defect  in  the  title  of  the 
person  negotiating  it.  A  holder  in  due  course  was 
frequently  called,  before  the  passage  of  the  act,  a 
bona  fide  purchaser  for  value  before  maturity,  and 
that  really  expresses  the  whole  idea,  unless,  perhaps, 
the  requirement  of  completeness  and  regularity  on 
the  face  of  the  instrument.  Until  the  contrary  is 
shown,  every  holder  is  presumed  to  be  a  holder  in 
due  course.    (Section  59.) 

148.  PAYEE  MAY  BE  A  HOLDER  IN  DUE 
COURSE. — The  payee  may  be  a  holder  in  due 
course  as  well  as  a  subsequent  holder.  This  often 
becomes  important.  In  a  recent  case  a  married 
woman  made  out  a  check  payable  to  a  man  to  whom 
she  owed  a  debt.  She  gave  this  check  to  her  hus- 
band with  directions  to  hand  it  to  the  creditor  in 
payment  of  her  debt.    Now  the  husband  owed  this 


92  NEGOTIABLE  INSTRUMENTS 

same  creditor  a  debt  on  his  own  account,  and  he 
handed  that  check  to  the  creditor  in  satisfaction,  not 
of  his  wife's  debt,  but  of  his  own.  The  creditor  pre- 
ferred, when  the  difficulty  was  discovered,  to  treat 
the  check  as  a  payment  of  the  husband's  debt,  for 
the  wife  was  responsible,  financially,  and  the  hus- 
band was  not,  and  the  court  held  the  creditor  was 
entitled  to  do  this.  Though  he  was  the  payee  of  the 
check  and  not  the  purchaser,  he  was  a  holder  in  due 
course,  having  taken  it  with  all  the  requirements 
just  discussed. 

149.  POSTDATED  INSTRUMENT.— An  in- 
strument which  is  antedated  or  postdated  is  not  on 
that  account  irregular  on  its  face,  and  one  may  be  a 
holder  in  due  course  of  such  an  instrument.  (Sec- 
tion 12.) 

150.  SECTION  53.— [WHEN  PERSON  NOT 
DEEMED  HOLDER  IN  DUE  COURSE.]  Where 
an  instrument  payable  on  demand  is  negotiated  an 
unreasonable  length  of  time  after  its  issue,  the 
holder  is  not  deemed  a  holder  in  due  course. 

151.  WHAT  IS  A  REASONABLE  TIME  FOR 
A  CHECK  OR  NOTE.— A  check  must  be  pre- 
sented within  a  reasonable  time  after  its  issuance. 
What  is  a  reasonable  time  depends  on  the  time  nec- 
essary to  collect,  and  undoubtedly  the  customary 
mode  of  collection  would  be  regarded  as  reasonable, 
even  though  that  was  not  the  quickest.  The  custo- 
mary mode  is  not  always  the  shortest  method. 
In  regard  to  notes,  the  rule  is  the  same  as  in  re- 


NEGOTIABLE  INSTRUMENTS  93 

gard  to  checks, — a  reasonable  time  from  the  issue 
of  the  note,  only  what  is  a  reasonable  time  for  a 
check  is  not  necessarily  a  reasonable  time  for  a 
note. 

152.  SECTION  54.— [NOTICE  BEFORE 
FULL  AMOUNT  PAID.]  Where  the  transferee 
receives  notice  of  any  infirmity  in  the  instrument  or 
defect  in  the  title  of  the  person  negotiating  the 
same  before  he  has  paid  the  full  amount  agreed  to 
be  paid  therefor,  he  will  be  deemed  a  holder  in  due 
course  only  to  the  extent  of  the  amount  theretofore 
paid  by  him. 

153.  RIGHTS  OF  ONE  WHO  HOLDS  A 
NOTE  FOR  COLLATERAL.— Contrast  with  the 
case  of  a  purchaser,  a  case  where  the  holder  at  ma- 
turity holds  the  note  merely  for  security.  In  that 
case  if  the  parties  liable  on  the  note — the  maker  and 
indorsers,  or  any  of  them — have  a  defence  good 
against  the  person  who  deposited  the  note  as  col- 
lateral, the  holder  for  collateral  can  only  collect  the 
amount  for  which  he  holds  the  note  pledged;  that 
is,  if  a  note  for  $1,000  was  deposited  to  secure  a 
claim  of  $500,  the  holder  could  collect  only  that  sum, 
because  that  satisfies  his  claim,  if  as  we  are  suppos- 
ing, the  man  who  deposited  it  as  collateral  was  not 
a  holder  in  due  course  and  could  not  himself  have 
collected  anything  from  the  parties  liable  on  the  in- 
strument. If  the  man  who  deposited  the  note  as 
collateral,  however,  was  a  holder  in  due  course,  then 
the  lender  who  holds  the  note  as  collateral  will  col- 
lect it  in  full  and  will  pay  over  to  the  man  who  de- 


94  NEGOTIABLE  INSTRUMENTS 

posited  the  note  the  excess  over  and  above  the  in- 
debtedness. 

154.  SECTION  55.— [WHEN  TITLE  DE- 
FECTIVE.] The  title  of  a  person  who  negotiates 
an  instrument  is  defective  within  the  meaning  of 
this  act  when  he  obtained  the  instrument,  or  any 
signature  thereto,  by  fraud,  duress,  or  force  and  fear, 
or  other  unlawful  means,  or  for  an  illegal  considera- 
tion, or  when  he  negotiates  it  in  breach  of  faith,  or 
under  such  circumstances  as  amount  to  a  fraud. 

NOTE. — In  the  Wisconsin  Act  there  is  added  at  the  end 
of  the  section:  "And  the  title  of  such  person  is  absolutely 
void  when  such  instrument  or  signature  was  so  procured 
from  a  person  who  did  not  know  the  nature  of  the  instru- 
ment and  could  not  have  obtained  such  knowledge  by  the 
use  of  ordinary  care." 

155.  ABSOLUTE  AND  PERSONAL  DE- 
FENCES.— Under  this  section  we  will  consider  the 
absolute  and  the  personal  defences  to  obligations  on 
negotiable  instruments.  We  have  already  consid- 
ered certain  cases  of  lack  of  genuineness  of  a  signa- 
ture owing  to  forgery  or  lack  of  authority. 

FRAUD  AS  AN  ABSOLUTE  DEFENCE. 
— Still  another  case  of  lack  of  genuineness  may  arise 
in  certain  cases  of  fraud.  Generally  fraud  is  only  a 
personal  or  equitable  defence,  but  in  certain  in- 
stances it  may  be  an  absolute  or  real  defence.  Such 
a  case  is  where  the  maker  of  the  instrument  did  not 
know  and  had  no  reasonable  cause  to  know  that  he 
was  making  a  negotiable  instrument  at  all.  If  a 
man  knows  he  is  making  such  an  instrument,  even 
though  he  is  induced  to  make  it  by  fraud,  it  is  his 


NEGOTIABLE  INSTRUMENTS  95 

instrument  and  he  is  bound  by  it.  But  suppose  by 
clever  sleight  of  hand  a  fraudulent  person  gets  an- 
other to  sign  a  note  who  is  under  the  belief  that  it 
is  a  receipt  or  letter  of  introduction  or  something  of 
that  sort  which  he  is  signing.  Here  you  will  notice 
that  the  signer  has  never  assented  to  make  a  nego- 
tiable instrument.  It  is  not  a  case  where  he  is  in- 
duced to  assent  by  false  representations.  There  he 
assents  to  do  the  thing  but  here  he  never  assented  to 
sign  a  negotiable  instrument  at  all ;  and  therefore  he 
may  assert  that  it  is  not  his  note,  unless  he  was 
guilty  of  such  negligence  as  precludes  him  from 
subsequently  asserting  the  truth  that  it  was  not  his 
instrument. 

156.  LACK  OF  TITLE.— A  second  absolute  de- 
fence is  lack  of  title  in  the  holder  of  an  order  instru- 
ment. Lack  of  title  in  an  instrument,  payable  to 
bearer,  as  we  have  said,  does  not  prevent  the  holder 
from  giving  a  good  title,  but  lack  of  title  in  an  in- 
strument payable  to  order  does.  Even  though  it  be 
conceded  that  the  maker  of  a  note  or  drawer  of  a 
check  be  liable,  he  has  a  right  to  pay  the  real  owner 
of  the  instrument.  If  he  should  pay  any  one  who 
did  not  have  title,  the  payment  would  not  be  a  dis- 
charge of  the  instrument,  and  he  would  have  to  pay 
over  again.  Therefore  he  has  a  defence  against 
anybody  who  has  not  title.  Consequently,  a  holder, 
to  recover  on  an  order  instrument,  must  make  out 
not  only  the  defendant's  liability  on  the  instrument 
to  some  one,  but  also  his  own  title  to  it. 


96  NEGOTIABLE  INSTRUMENTS 

157.  A  HOLDER'S  BANKRUPTCY  DE- 
PRIVES HIM  OF  TITLE.— Another  case  of  lack 
of  title  is  where  the  holder  of  negotiable  paper  has 
become  bankrupt.  The  National  Bankruptcy  Law 
vests  in  the  trustee  all  property  which  the  bank- 
rupt had  at  the  time  of  his  bankruptcy.  We  suppose 
that  statute  vests  an  absolute  title  even  to  negotia- 
ble paper,  so  that  one  who  innocently  bought  nego- 
tiable order  paper  from  a  bankrupt  to  whom  it  was 
payable  after  his  bankruptcy  would  not  be  pro- 
tected. The  trustee  in  bankruptcy  would  have  be- 
come the  owner  of  it  and  the  bankrupt  himself 
would  have  no  better  right  to  it  than  if  he  held 
under  a  forged  indorsement.  If,  however,  the  in- 
strument was  payable  to  bearer,  under  the  general 
rule  applicable  to  such  paper,  the  bankrupt  holder, 
though  having  no  title  himself,  could  transfer  a 
good  title  to  a  holder  in  due  course. 

1 58.  INCAPACITY.  —  INFANCY.  —  Another 
absolute  defence  to  a  negotiable  instrument  good 
against  any  holder  is  the  incapacity  of  a  party.  The 
instrument  may  be  binding  as  to  some  parties,  but 
on  account  of  incapacity  others  may  not  be  liable. 
The  commonest  kind  of  incapacity  is  infancy,  that 
is,  minority  of  a  party.  It  is  a  good  defence  even 
against  a  holder  in  due  course  that  the  party  sued  is 
a  minor.  It  is  not  a  good  defence  that  a  prior  holder 
was  a  minor  when  he  indorsed  the  instrument. 
Though  the  minor  may  avoid  that  transfer  as 
against  the  transferee,  until  and  unless  he  does  so, 


NEGOTIABLE  INSTRUMENTS  97 

it  is  a  good  transfer,  and  the  maker  will  be  bound  to 
pay  the  transferee.    (Section  22.) 

159.  LUNACY. — Somewhat  similar  to  infancy  is 
the  case  of  lunacy.  It  is  possible  that  in  some  cases 
of  lunacy  the  transaction  may  be  absolutely  void 
and  incapable  of  ratification ;  but  whether  this  is  so 
or  not,  lunacy  is  generally  held  a  good  ground  for 
treating  the  obligation  of  an  insane  person  on  the 
instrument  as  voidable,  even  when  it  is  in  the  hands 
of  a  holder  in  due  course. 

160.  HUSBAND  AND  WIFE.— Formerly  a 
married  woman  could  make  no  valid  contract  by  ne- 
gotiable instrument  or  otherwise.  This  complete 
disability  is  now  generally  done  away  with,  but  it  is 
still  true,  in  most  States,  that  a  husband  and  wife 
cannot  make  a  valid  contract  with  one  another,  and 
therefore  neither  of  them  can  make  a  valid  obliga- 
tion from  one  to  the  other  on  a  negotiable  instru- 
ment. A  note  by  a  husband  to  wife  or  wife  to  hus- 
band is,  therefore,  worthless,  even  in  the  hands  of  a 
holder  in  due  course.  Similarly,  an  indorsement 
from  one  to  the  other  will  not  be  a  valid  transfer 
and  will  create  no  obligation.  A  check  from  one  to 
the  other  deserves  a  moment's  attention.  Such  a 
check  does  not  create  any  obligation  between  the 
drawer  and  payee,  but  it  is  a  valid  order  to  the  bank 
by  the  drawer  to  pay  the  payee.  Accordingly,  if  the 
bank  does  so,  the  payment  is  good.  In  some  States 
married  women  are  under  the  further  disability  that 
they  cannot  become  sureties  for  their  husbands.    In 


98  NEGOTIABLE  INSTRUMENTS 

such  States,  therefore,  there  would  be  an  absolute 
defence  to  any  suit  against  a  married  woman  based 
on  an  obligation  which  she  signed  as  surety  for  her 
husband. 

161.  ILLEGALITY.— A  fifth  absolute  defence  is 
raised  by  certain  kinds  of  illegality.  Some  transac- 
tions are  so  illegal  that  even  in  the  hands  of  a  holder 
in  due  course  a  negotiable  instrument  given  in  pur- 
suance of  them  will  not  be  valid.  Under  the  stat- 
utes of  some  States,  usury  is  a  defence  of  that  sort. 
In  other  States,  there  is  no  general  usury  law. 

162.  SUNDAY  LAWS.— The  Sunday  law  of 
many  States  is  rather  troublesome  at  times.  One 
must  remember  in  connection  with  this  matter  that 
it  is  the  delivery  of  a  negotiable  instrument,  not  the 
date  which  it  bears  on  its  face,  which  fixes  the  time 
when  it  takes  effect.  Accordingly,  a  note  dated  on 
Sunday  but  delivered  on  Monday  is  good.  On  the 
other  hand,  a  note  dated  on  Saturday  or  Monday  but 
actually  delivered  on  Sunday  is  bad,  though  a  sub- 
sequent holder,  who  took  such  a  note  in  ignorance  of 
the  day  when  it  was  delivered,  might  rely  on  the 
form  of  the  instrument — that  is,  on  the  fact  that  it 
was  dated  on  Saturday  or  Monday — and  be  pro- 
tected. The  maker  would  be  estopped  to  deny  that 
it  was  delivered  on  Saturday  or  Monday  since  the 
date  may  properly  be  assumed  to  be  the  true  date. 
(Section  11.)  A  note,  however,  which  was  dated  on 
Sunday,  and  which  was  delivered  as  a  matter  of  fact 
also  on  Sunday,  would  seem  to  be  bad  in  the  hands 


NEGOTIABLE  INSTRUMENTS  99 

of  any  holder,  for  any  holder  has  notice  by  the  date 
of  the  time  of  probable  delivery,  and  therefore  ought 
to  be  on  the  lookout  for  that. 

163.  ILLEGALITY  AS  A  PERSONAL  DE- 
FENCE.— One  who  is  not  a  holder  in  due  course  is 
subject  not  only  to  the  absolute  defences  already 
considered,  but  also  to  what  are  called  personal  or 
equitable  defences,  and  these  may  now  be  consid- 
ered. Some,  but  not  all  of  them,  are  briefly  summar- 
ized in  Section  55.  First,  illegality.  As  we  have  pre- 
viously said  earlier,  illegality  may  sometimes  be  an 
absolute  defence  good  against  everybody,  but  it  is 
more  commonly  a  personal  defence  good  only 
against  the  original  party  to  the  illegality  and  those 
subsequent  holders  who  are  not  holders  in  due 
course.  Some  of  the  commonest  kinds  of  illegality 
are  wagering,  including  under  this  designation  such 
stock  gambling  or  gambling  in  securities,  as  is  pro- 
hibited by  law.  Usury  is,  in  most  States,  where 
there  are  usury  laws,  a  personal  defence.  The  sale 
of  goods  contrary  to  law  may  give  rise  to  a  personal 
defence  to  a  note  given  for  the  price.  Instruments 
given  as  bribes  to  any  person  subject  to  a  public  or 
private  duty  to  induce  him  to  disregard  that  duty 
would  also  be  another  illustration.  It  would  make 
no  difference  whether  the  official  bribed  were  a  pub- 
lic officer,  a  corporation  official,  a  trustee,  an  em- 
ployee of  a  firm,  or  an  individual.  So  any  transac- 
tion which  involves  a  breach  of  fiduciary  duty  or 
official  duty,  whatever  its  nature,  would  be  illegal, 


100        NEGOTIABLE  INSTRUMENTS 

and  a  negotiable  instrument  which  formed  part  of 
the  transaction  would  be  subject  to  a  personal 
defence. 

164.  FRAUD. — A  second  personal  defence,  and 
perhaps  the  commonest,  is  fraud.  As  already  stated, 
fraud  may  be  an  absolute  defence.  If  the  fraud  pre- 
vented a  party  to  the  instrument  from  knowing  that 
he  was  signing  a  negotiable  instrument,  he  would 
have  an  absolute  defence,  unless  he  was  grossly  neg- 
ligent. On  the  other  hand,  if  he  knew  that  he  was 
signing  a  negotiable  instrument,  but  was  induced  to 
do  so  by  false  representations,  the  defence  would  be 
merely  personal.  Suppose  a  note  was  a  perfectly 
good  note  as  between  the  maker  and  payee,  but  was 
obtained  from  the  payee  by  fraud,  the  indorsement 
of  the  payee  being  obtained  by  fraudulent  represen- 
tation. Payment  is  then  demanded  by  the  fraudu- 
lent indorsee.  The  instrument  would  be  technically 
discharged  by  such  a  payment;  but  if  the  maker 
knows  of  the  fraud  he  would  make  himself  a  party  to 
it  if  he  should  pay  the  fraudulent  indorsee,  and 
would  be  liable  to  pay  again  to  the  defrauded  payee. 
This  sort  of  case  may  put  a  bank  in  rather  a  hard 
place.  Suppose  a  check  drawn  on  a  bank  is  pre- 
sented by  an  indorsee  and  the  bank  believes  and  is 
informed  by  the  payee  that  that  check  was  obtained 
by  fraud.  If  in  fact  it  was  obtained  by  fraud  and 
the  bank  refused  to  pay,  its  defence  would  be  good 
against  any  assertion  or  complaint  by  the  drawer  of 
the  check  that  his  check  had  been  dishonored;  but 


NEGOTIABLE  INSTRUMENTS        101 

suppose  there  was,  as  it  turned  out,  no  fraud,  then  if 
the  bank  had  refused  payment  of  the  check,  even 
temporarily,  it  would  run  a  risk  of  subjecting  itself 
to  a  suit  for  damage  by  its  customer,  the  drawer. 
Nevertheless,  there  is  nothing  that  can  be  done  ex- 
cept to  refuse  temporarily  and  file  a  bill  for  inter- 
pleader against  the  payee  and  the  indorsee,  asking 
the  court  to  determine  which  of  the  two  parties  is 
entitled  to  the  instrument. 

165.  DURESS. — A  defence  somewhat  similar  to 
fraud  is  what  is  known  in  law  as  duress.  This  was 
at  first  confined  by  law  to  cases  where  a  person  was 
compelled  to  sign  an  instrument  under  imminent 
fear  of  bodily  harm  or  imprisonment,  but  the  de- 
fence has  now  been  extended  beyond  that.  There 
are  many  kinds  of  duress  which  do  not  threaten  the 
person  under  duress  himself  with  immediate  harm. 
For  instance,  a  case  arose  in  New  Jersey  which  pre- 
sented these  facts :  a  husband  threatened  to  blow  his 
brains  out  if  his  wife  did  not  sign  an  instrument,  and 
brandished  a  pistol  so  that  his  threat  seemed  at  least 
plausible,  and  thereby  induced  his  wife  to  sign  a 
paper.  She  would  have  a  personal  defence  against, 
an  obligation  entered  into  in  that  way.  So  a  threat 
to  injure  a  child  or  to  injure  another  person  may 
have  even  more  effect  than  a  threat  to  injure  the 
person  himself  whose  signature  is  demanded.  The 
test  today  is,  was  such  pressure  put  upon  the  signer 
as  to  prevent  him  from  being  really  a  free  agent  in 
the  matter?    It  is  not  duress,  however,  to  threaten 


102        NEGOTIABLE  INSTRUMENTS 

to  enforce  one's  legal  rights  unless  an  instrument  is 
signed.  For  instance,  a  threat  by  a  creditor  to  sue, 
or  a  threat  to  attach  the  debtor's  property  unless  the 
debtor  signed  a  note,  would  not  be  such  duress  as  to 
create  even  a  personal  defence. 

166.  LACK  OF  DELIVERY.— Lack  of  delivery 
is  a  personal  defence.  Until  the  passage  of  the  Ne- 
gotiable Instruments  Law  it  was  an  absolute  de- 
fence, but  now,  by  virtue  of  Section  16,  it  is  only  a 
personal  defence.  Suppose  you  make  a  note  payable 
to  bearer  and  put  it  in  your  safe,  intending  to  deliver 
it  the  next  day.  It  is  stolen  and  transferred  before 
maturity  to  a  purchaser  for  value  v/ithout  notice. 
He  can  hold  you  liable  upon  it,  although  you  never 
delivered  the  instrument,  and  perhaps  wrote  it  as  a 
mere  writing  exercise.  And  similarly  (a  case  that  is 
more  likely  to  happen)  if  you  have  a  note  payable  to 
yourself,  indorse  it  without  delivering  it,  put  it  in 
your  safe,  and,  as  before,  it  is  stolen.  A  purchaser 
for  value  from  the  thief  not  only  becomes  the  owner 
of  the  note,  able  to  enforce  it  against  the  maker,  but 
he  can  hold  you  liable  on  your  indorsement  as  an 
indorser.  Lack  of  delivery  is  therefore  not  an  abso- 
lute defence.  It  is,  however,  a  personal  defence 
good  against  the  original  payee  and  any  one  with 
notice  that  the  instrument  was  not  delivered  or  was 
delivered  only  for  a  special  purpose  which  has  not 
happened.  For  instance,  if  you  deliver  a  note  to  a 
note  broker  to  dispose  of,  and  he  does  not  dispose  of 
it  in  accordance  with  the  authority  you  gave  him, 


NEGOTIABLE  INSTRUMENTS         103 

you  have  a  personal  defence  against  him  if  he  tries 
to  collect  it,  or  against  any  one  who  knew  of  the  cir- 
cumstances, because  of  the  original  understanding 
that  the  instrument  should  be  delivered  as  a  binding 
obligation  only  on  certain  terms. 

167.  LACK  OF  CONSIDERATION.— Another 
personal  defence  is  lack  of  consideration.  We  have 
already  referred  to  that  subject  in  text  paragraphs 
17  to  22  in  connection  with  the  liabilities  of  different 
parties  on  negotiable  instruments,  and  it  is  not 
necessary  to  repeat  what  has  been  said  before.  It 
is  enough  to  say  here  that  if  there  is  not  the  consid- 
eration or  value  which  the  law  requires  for  the  ob- 
ligation of  any  party  to  an  instrument,  he  has  a 
defence  as  against  anybody  but  a  holder  in  due 
course  because  of  this  lack  of  consideration  or  value. 
The  commonest  kind  of  signature  without  consid- 
eration is  that  of  an  accommodation  party.  An  ac- 
commodation party,  therefore,  even  though  the 
maker  of  the  instrument,  cannot  be  sued  by  the 
holder  if  the  holder  was  the  accommodated  party. 
There  is  one  peculiarity,  however,  about  the  defence 
of  accommodation  which  distinguishes  it  from  all 
other  personal  defences.  An  accommodation  party 
has  no  defence  merely  because  the  holder  took  the 
instrument  from  the  accommodated  party  with 
knowledge  that  it  was  given  for  accommodation. 
(Section  29.)  Generally,  as  we  have  seen,  one  who 
takes  with  a  notice  of  a  personal  defence  from  one 
who  was  subject  to  that  defence,  becomes  himself 


104        NEGOTIABLE  INSTRUMENTS 

subject  to  the  defence  in  the  same  way  as  the  man 
from  whom  he  took  it.  One  who  takes  from  a 
fraudulent  payee  knowing  of  the  fraud  can  no  more 
collect  than  the  fraudulent  payee,  but  one  who  takes 
from  an  accommodated  payee  knowing  of  the  ac- 
jcommodation  can,  if  he  gives  value,  collect  from  the 
accommodation  maker.  And  the  reason  for  this  dis- 
tinction is  plain:  the  accommodating  party  lent  his 
signature  for  the  very  purpose  of  having  it  nego- 
tiated, and  therefore  it  would  be  highly  improper 
not  to  allow  one  who  has  relied  on  the  signature  to 
recover  upon  it,  even  though  he  knew  perfectly  well 
that  it  was  for  accommodation.  In  buying  the  in- 
strument or  lending  money  on  it,  he  is  doing  ex- 
actly what  the  accommodating  party  expected  him 
to  do. 

168.  FAILURE  OF  CONSIDERATION.— A 
defence  somewhat  similar  to  lack  of  consideration 
and  yet  a  different  one  is  what  is  called  failure  of 
consideration.  This  arises  where  an  instrument  is 
given  for  some  prospective  or  promised  return 
which  is  not  given.  For  instance,  suppose  a  note  is 
given  in  return  for  a  promise  to  deliver  goods  later. 
There  is  no  lack  of  consideration,  strictly  speaking, 
for  this  note,  because  there  was  a  promise  to  deliver 
the  goods,  and  a  promise  is  sufficient  consideration 
for  the  note.  But  if  the  goods  are  not  delivered 
when  the  time  comes  there  is  failure  of  considera- 
tion ;  the  thing  expected  was  not  given ;  the  promise 
has  not  been  kept.    And  thus  where  there  is  failure 


NEGOTIABLE  INSTRUMENTS        105 

of  consideration  the  person  who  was  to  give  the 
consideration  cannot  recover  because  he  has  failed 
to  give  it,  and  any  holder  who  took  the  note,  know- 
ing that  the  consideration  had  failed,  will  similarly 
be  unable  to  recover.  Perhaps  as  common  an  illus- 
tration of  this  defence  as  any  arises  where  a  note  is 
given  for  the  price  of  a  chattel  which  is  warranted 
and  there  is  a  breach  of  the  warranty.  In  many 
States,  that  entitles  the  buyer  of  the  chattel  to 
rescind  the  contract,  to  give  back  what  he  has 
bought,  and  to  demand  his  discharge  from  the  obli- 
gation of  the  note.  Accordingly,  if  he  tenders  back 
the  inferior  chattel  he  has  a  defence  against  any 
action  on  the  note  brought  either  by  the  payee,  who 
sold  the  chattel  and  warranted  it,  or  by  anybody 
taking  from  that  payee  who  is  not  a  holder  in  due 
course. 

169.  DISCHARGE  BEFORE  MATURITY.— 
Still  another  personal  defence  is  discharge  of  an 
instrument  before  maturity  in  any  way  except  by 
the  cancellation  of  it.  We  have  already  seen  in 
paragraph  66  that  cancellation  of  a  negotiable  in- 
strument, even  before  maturity,  is  an  absolute  dis- 
charge of  it.  Any  kind  of  discharge  by  payment, 
release,  or  accord  and  satisfaction  is  a  good  defence 
after  maturity,  because  after  maturity  there  can  no 
longer  be  a  holder  in  due  course.  Every  one  who 
takes  after  maturity  will  take  subject  to  that  de- 
fence of  payment  or  release  or  accord  and  satisfac- 
tion.   But  payment,  or  release,  or  accord  and  satis- 


106        NEGOTIABLE  INSTRUMENTS 

faction  of  a  negotiable  instrument  before  maturity 
is  only  a  personal  defence.  You  may  have  a  holder 
in  due  course  after  the  payment  or  release,  and  this 
holder  in  due  course  can  sue  again  on  the  instru- 
ment and  recover  in  spite  of  the  fact  that  the  mak- 
er has  already  paid  once.  The  moral,  of  course, 
is  plain,  that  if  an  attempt  is  made  to  settle  a  nego- 
tiable instrument  before  it  is  due,  it  must  be  accom- 
panied by  a  cancellation  of  the  instrument ;  that  is, 
some  physical  mutilation  or  destruction  of  the 
paper  sufficient  to  show  that  it  is  no  longer  a  valid 
obligation. 

170.  ALTERATION.— Another  personal  de- 
fence is  alteration,  of  v^rhich  we  have  already  spoken 
in  connection  with  absolute  or  real  defences.  The 
maker  of  an  altered  note  has  an  absolute  defence 
against  the  note*  in  its  altered  form,  but  has  a  per- 
sonal defence  only  against  it  in  its  original  form, 
that  is,  a  holder  in  due  course  can  enforce  the  note 
according  to  its  original  tenor.  Nobody  can  enforce 
it  according  to  its  altered  tenor. 

171.  SET-OFF  AS  A  PERSONAL  DEFENCE. 
— Another  personal  defence  may  arise  from  a  right 
of  set-off.  Suppose  the  maker  of  a  note  has  on  an- 
other account  a  claim  against  the  payee  which  the 
maker  of  the  note  could  set  off  against  the  claim  of 
the  payee  if  the  payee  should  sue  on  the  note.  Now 
suppose  the  payee  indorses  the  note.  Can  the  maker 
use  this  right  of  set-off  against  the  indorsee  who 
has  purchased  the  note,  or  must  the  maker  pay  the 


NEGOTIABLE  INSTRUMENTS        107 

note  in  full  to  the  holder  and  then  try  to  collect  his 
own  claim  from  the  original  payee  ?  It  is  held  gen- 
erally in  this  country,  to  depend  upon  whether  the 
indorsee  was  a  holder  in  due  course.  If  he  is,  he 
takes  free  of  the  right  of  set-off.  If,  however,  he 
did  not  give  value,  or  if  he  knew  of  the  claim  in  set- 
off, or  purchased  after  maturity,  generally  in  this 
country  the  maker  of  the  note  may  assert  his  right 
of  set-off  against  the  indorsee.  In  England  he  can- 
not do  that.  It  is  said  there,  that  the  right  of  set-off 
is  not  really  an  equity  relating  to  the  note,  and  that 
it  is  a  separate  claim  good  only  against  the  original 
payee,  which  should  not  travel  with  the  note  and 
should  not  under  any  circumstances  be  good  against 
anybody  but  the  payee  of  the  note. 

172.  PAROL  EVIDENCE  RULE.— This  con- 
cludes the  list  of  personal  defences  with  the  excep- 
tion of  one  thing,  which  partakes  somewhat  of  the 
nature  of  a  personal  defence,  although  it  is  a  more 
extensive  matter  than  a  mere  personal  defence. 
This  is  what  is  called  the  Parol  Evidence  Rule.  The 
Parol  Evidence  Rule  in  substance  is  this :  when  any 
party  enters  into  a  written  contract  the  terms  of  the 
contract  must  be  determined  wholly  from  the  writ- 
ing. This  rule  does  not  apply  simply  to  bills  and 
notes,  it  applies  to  any  written  contract,  and  it  for- 
bids parties  to  written  contracts  attempting  to  prove 
that  the  writing  is  not  really  what  they  agreed,  or 
that  they  agreed  to  something  more  or  something 
less  than  the  writing.    Nothing  is  commoner  than 


108        NEGOTIABLE  INSTRUMENTS 

for  parties  to  attempt  that  sort  of  wriggling  out  of 
a  written  contract.  The  party  to  the  writing  who 
finds  his  feet  pinched  by  some  of  its  provisions  fre- 
quently in  good  faith  thinks  it  was  not  what  the 
parties  originally  meant.  The  Parol  Evidence  Rule 
requires  the  court  to  enforce  the  writing,  and  not 
what  the  parties  testify  they  meant  or  would  have 
written  if  they  had  thought  about  it,  or  anything  of 
that  sort.  Not  infrequently  the  Parol  Evidence 
Rule  works  a  certain  injustice,  because  it  may  be 
true  that  the  writing  did  not  contain  all  that  the 
parties  agreed,  or  contains  something  a  little  differ- 
ent from  what  they  bargained  for.  But  the  defence 
of  the  rule  is  that  it  makes  more  certain  the  real 
agreement  between  the  parties  in  so  many  more 
cases  than  those  where  it  works  injustice,  that  on 
the  whole  it  works  well. 

173.  ILLUSTRATIONS  OF  INADMISSIBLE 
PAROL  EVIDENCE  —Now  how  does  the  Parol 
Evidence  Rule  hit  negotiable  instruments?  Not  in- 
frequently a  party  to  an  instrument  will  attempt  to 
set  up  some  agreement  which  he  asserts  he  made  in 
regard  to  the  note.  A  common  agreement  of  this 
sort  is  an  agreement  that  the  note  need  not  be  paid 
at  maturity  but  may  be  extended.  That  sort  of 
agreement  if  made  contemporaneously  with  the 
note  cannot  be  proved.  The  note  by  its  terms  says 
it  is  payable  on  such  a  day.  It  would  contradict  the 
terms  of  that  writing  to  set  up  and  prove  an  agree- 
ment that  it  was  not  to  be  paid  then,  but  that  it  was 


NEGOTIABLE  INSTRUMENTS        109 

to  be  paid  at  some  later  day.  So  if  a  note  is  positive 
in  terms  it  would  not  be  permissible  to  show  that  it 
was  agreed  between  the  parties  that  the  note  should 
be  paid  only  upon  a  certain  contingency.  That  sort 
of  agreement  is  frequently  made,  but  it  is  invalid 
unless  made  part  of  the  writing. 

174.  SUBSEQUENT  ORAL  AGREEMENTS 
ARE  VALID. — We  must  call  attention,  however, 
to  this  fact,  that  the  Parol  Evidence  Rule  relates 
only  to  agreements  made  at  or  before  the  time  when 
the  writing  was  executed.  One  may  make  a  subse- 
quent oral  agreement  which,  if  it  has  sufficient  con- 
sideration, will  not  infringe  upon  the  Parol  Evi- 
dence Rule  and  will  be  binding.  The  reason  of  this 
distinction  between  subsequent  agreements  and 
agreements  made  at  or  before  the  time  of  the  writ- 
ing is  this:  the  theory  of  the  Parol  Evidence  Rule 
is  that  when  parties  reduce  their  agreement  to  writ- 
ing, prima  facie  they  include  in  that  writing  every- 
thing relating  to  that  matter.  But  the  next  day  or 
the  next  week  they  may  change  their  minds,  and 
they  have  a  right  to  make  a  new  agreement.  There 
is  nothing  in  the  fact  that  they  made  a  writing  yes- 
terday which  would  lead  any  one  to  suppose  that 
that  writing  was  going  to  be  good  permanently; 
but  it  is  fair  to  suppose  that  at  the  time  they  made 
it,  it  expressed  their  whole  intention  in  regard  to  the 
matter.  Consequently,  these  contemporaneous 
agreements  which  we  have  suggested,  relating  to 
the  same  subject-matter  as  the  note  and  inconsist- 


110        NEGOTIABLE  INSTRUMENTS 

ent  with  its  terms,  cannot  be  shown,  but  let  us  put 
some  cases  of  matters  which  may  seem  to  come 
pretty  close  to  the  Parol  Evidence  Rule  and  which 
nevertheless,  may  be  shown. 

175.  ILLUSTRATIONS  OF  WHAT  MAY  BE 
PROVED. — It  may  be  shown  that  indorsers  are 
not  liable  in  the  order  in  which  their  names  appear 
on  the  paper.  It  is  not  regarded  as  a  contradiction 
of  the  instrument  to  show  that  the  first  indorser 
really  wrote  his  name  low  down  on  the  back  of  the 
paper  and  the  second  indorser  wrote  his  higher  up. 
Neither  is  it  an  infringement  of  the  Parol  Evidence 
Rule  to  show  that  one  of  the  signers  signed  for  the 
accommodation  of  another ;  that  does  not  affect  the 
liability  of  the  accommodating  party  to  the  holder 
of  the  note.  If  he  is  a  maker  he  is  liable  as  a  maker, 
even  though  he  makes  the  instrument  for  accom- 
modation. The  fact  that  the  instrument  was  never 
delivered  as  a  negotiable  instrument  may  be  shown. 
It  may  be  shown  that  the  date  which  the  instru- 
ment bears  on  its  face,  though  such  a  date  is  prima 
facie  proof  of  the  date  when  the  instrument  was 
delivered,  was  not  really  the  date  of  delivery.  It 
may  be  shown  that  the  instrument  when  delivered 
was  either  antedated  or  postdated.  If  the  language 
is  ambiguous  also  the  law  allows  evidence  of  the 
surrounding  circumstances  and  other  matters  tend- 
ing to  show  what  the  ambiguous  words  really 
meant.  In  any  kind  of  contract  the  Parol  Evidence 
Rule  does  not  prevent  a  party  from  showing  that 


NEGOTIABLE  INSTRUMENTS        111 

the  instrument  took  its  present  form  because  of 
fraud  or  duress,  and  certain  cases  of  gross  mistake 
also  may  be  shown,  and  the  enforcement  of  the  con- 
tract relieved  against.  It  has  sometimes  been 
thought  inconsistent  with  the  principle  of  the  Parol 
Evidence  Rule  that  an  acceptance  of  a  bill  of  ex-' 
change  should  not  be  required  to  be  written  on  the 
face  of  the  instrument.  It  is  the  custom  of  mer- 
chants, of  course,  when  a  bill  is  accepted  to  write  it 
on  the  bill,  but  an  acceptance  may  legally  not  only 
be  written  in  that  way  but  may  also  be  written  on  a 
paper  other  than  the  bill  itself.  That  is  so  provided 
in  section  151.  But  such  an  acceptance  only  binds 
the  acceptor  in  favor  of  a  person  to  whom  it  is 
shown  and  who  on  the  faith  thereof  receives  the 
bill  for  value.  Furthermore,  even  before  a  bill  is 
drawn  an  unconditional  promise  in  writing  to  ac- 
cept the  bill  is  deemed  an  acceptance  in  favor  of 
any  one  who  on  the  faith  of  the  writing  receives  the 
bill  for  value. 

176.  RELATION  OF  PAROL  EVIDENCE 
RULE  TO  PERSONAL  DEFENCES.— Now  how 
does  the  Parol  Evidence  Rule  have  anything  to  do 
with  personal  defences  and  holders  in  due  course? 
Only  in  this  way :  that  a  purchaser  who  is  a  holder 
in  due  course  unquestionably  will  have  a  right  to 
rely  on  the  terms  of  the  instrument  as  they  appear 
in  the  writing.  Whether  a  collateral  agreement 
does  or  does  not  infringe  upon  the  Parol  Evidence 
Rule,  it  is  important  to  determine  whether  it  may 


112        NEGOTIABLE  INSTRUMENTS 

be  shown  as  between  the  original  parties  to  the  in- 
strument; but  in  either  case  it  cannot  be  shown  as 
against  a  holder  in  due  course  if  the  terms  of  the 
instrument  do  not  indicate  the  defence. 

177.  SECTION  56.— [WHAT  CONSTITUTES 
NOTICE  OF  DEFECT.]  To  constitute  notice  of 
an  infirmity  in  the  instrument  or  defect  in  the  title 
of  the  person  negotiating  the  same,  the  person  to 
whom  it  is  negotiated  must  have  had  actual  knowl- 
edge of  the  infirmity  or  defect,  or  knowledge  of 
such  facts  that  his  action  in  taking  the  instrument 
amounted  to  bad  faith. 

178.  COMMENT  ON  SECTION  56.— There 
was  formerly  considerable  litigation  upon  the  ques- 
tion whether  one  who  took  an  instrument  for  value 
and  in  good  faith,  but  negligently,  was  a  holder  in 
due  course.  In  other  words — is  it  the  equivalent  of 
actual  notice  of  a  defence  to  prove  that  if  the  holder 
had  not  been  negligent  he  would  have  learned  of  the 
defence  in  question?  The  statute  establishes  that 
negligence  is  not  the  equivalent  of  notice.  Knowl- 
edge of  such  facts  is  necessary,  as  would  indicate 
actual  bad  faith. 

179.  SECTION  57.— [RIGHTS  OF  HOLDER 
IN  DUE  COURSE.]  A  holder  in  due  course  holds 
the  instrument  free  from  any  defect  of  title  of  prior 
parties,  and  free  from  defences  available  to  prior 
parties  among  themselves,  and  may  enforce  pay- 
ment of  the  instrument  for  the  full  amount  thereof 
against  all  parties  liable  thereon. 

NOTE. — In  the  Illinois  Act  defenses  of  fraud,  circumven- 
tion and  gaming  within  the  meaning  of  certain  local  statutes 


NEGOTIABLE  INSTRUMENTS        113 

are  excepted  and  remain  as  before  the  passage  of  the  Act, 
absolute  defenses.  In  the  Wisconsin  statute  also  some  ex- 
ception are  made  to  the  enactment  of  freedom  from  defenses. 

180.  COMMENT  ON  SECTION  57.— It  might 
not  be  easy  to  say  what  this  section  meant  by  "de- 
fect of  title"  or  "defences  available  to  prior  parties 
among  themselves,"  if  we  did  not  have  the  well  set- 
tled law  existing  prior  to  the  adoption  of  the  statute 
to  aid  in  construing  it.  With  this  aid  it  is  clear  that 
what  is  meant  is  that  the  holder  in  due  course  takes 
free  of  personal  defences  or  equities  though  he  does 
not  take  free  of  absolute  defences.  We  have  already 
considered  what  defences  fall  under  each  heading. 

181.  SECTION  58.— [WHEN  SUBJECT  TO 
ORIGINAL  DEFENCES.]  In  the  hands  of  any 
holder  other  than  a  holder  in  due  course,  a  negotia- 
ble instrument  is  subject  to  the  same  defences  as  if 
it  were  non-negotiable.  But  a  holder  who  derives 
his  title  through  a  holder  in  due  course,  and  who  is 
not  himself  a  party  to  any  fraud  or  illegality  affect- 
ing the  instrument,  has  all  the  rights  of  such  former 
holder  in  respect  of  all  parties  prior  to  the  latter. 

182.  COMMENT  ON  SECTION  58.— One  who 
is  not  a  holder  in  due  course  is  (1)  a  person  who  has 
not  given  value;  that  is,  a  donee;  and  (2)  a  person 
who  has  notice  of  a  defence.  We  have  seen  that  a 
holder  may  give  partial  value  and  will,  therefore, 
become  a  holder,  in  due  course,  to  the  extent  of  the 
value  of  which  he  has  given.  It  is  also  conceivable 
that  a  holder  may  take  with  notice  of  a  defect 
amounting  to  only  a  partial  defence  to  the  instru- 


114        NEGOTIABLE  INSTRUMENTS 

ment.    The  last  sentence  in  Section  58  imposes  an 
important  qualification  on  the  rule  that  notice  of  a 
defect  subjects  one  who  takes  the  instrument  to  a 
defence.    After  an  instrument  has  once  come  into 
the  hands  of  a  holder  in  due  course,  all  personal  de- 
fences or  equities  in  favor  of  prior  parties  are  there- 
upon cut  off.    As  the  holder  in  due  course  might 
enforce  the  instrument  in  spite  of  such  equities,  he 
may  give  his  own  rights  to  whomsoever  he  will.  He 
will  not  lose  his  rights  if  he  finds  out  the  defence 
subsequent  to  his  acquisition  of  the  instrument,  and 
if  he  seeks  to  sell  the  instrument  to  another  he  may 
tell  the  purchaser  the  facts  and  the  purchaser  may 
safely  buy.    Although  he  will  know  there  was  an 
equity,  he  will  also  know  that  the  equity  has  been 
cut  off.    This  does  not  injure  the  party  who  had  a 
personal  defence.    It  is  no  more  burdensome  to  him 
to  pay  a  subsequent  purchaser  than  it  would  be  to 
pay  the  first  holder  in  due  course.    Therefore,  when 
any  personal  defence  is  raised,  the  question  is  not 
simply  whether  the  present  holder  is  a  holder  in  due 
course  but  whether  at  any  time  subsequent  to  the 
delivery  of  the  obligation,  enforcement  of  which  is 
sought,  the  instrument  has  come  into  the  hands  of 
such  a  holder. 

183.  SECTION  59.— [WHO  DEEMED 
HOLDER  IN  DUE  COURSE.]  Every  holder  is 
deemed  prima  facie  to  be  a  holder  in  due  course ;  but 
when  it  is  shown  that  the  title  of  any  person  who 
has  negotiated  the  instrument  was  defective,  the 


NEGOTIABLE  INSTRUMENTS        115 

burden  is  on  the  holder  to  prove  that  he  or  some 
person  under  whom  he  claims  acquired  the  title  as 
holder  in  due  course.  But  the  last-mentioned  rule 
does  not  apply  in  favor  of  a  party  who  became 
bound  on  the  instrument  prior  to  the  acquisition  of 
such  defective  title. 

184.  COMMENT  ON  SECTION  59.— This  sec- 
tion relates  merely  to  the  burden  of  proof.  Prima 
facie  the  holder  of  an  instrument  is  a  rightful  holder, 
and  a  holder  for  value.  When,  however,  it  has  been 
shown  that  an  equity  existed,  the  burden  is  then  on 
the  holder  to  establish  that  this  equity  has  been  cut 
off  by  the  acquisition  of  the  instrument  at  some 
time  by  a  holder  in  due  course. 

Article  V — Liabilities  of  Parties 

185.  SECTION  60.— [LIABILITY  OF  MAK- 
ER.] The  maker  of  a  negotiable  instrument  by 
making  it  engages  that  he  will  pay  it  according  to 
its  tenor,  and  admits  the  existence  of  the  payee  and 
his  then  capacity  to  endorse. 

186.  LIABILITY  OF  A  DRAWEE,  AC- 
CEPTOR AND  MAKER.— The  drawee  until  he 
accepts  a  bill  is  not  liable  on  the  instrument,  but  he, 
may  be  liable  by  virtue  of  a  collateral  contract  with 
the  drawer.  For  instance,  if  a  bank  fails  to  honor  a 
check  drawn  upon  it  when  the  drawer  has  funds, 
the  bank  will  be  liable  not  on  the  check  and  not  to 
the  holder  of  the  check,  but  to  the  drawer  of  the 
check  on  his  implied  contract  with  the  bank  when 
he  became  a  depositor  that  the  bank  would  honor 


116        NEGOTIABLE  INSTRUMENTS 

such  checks  as  he  should  draw  within  the  limits  of 
his  account.  The  acceptor  when  he  accepts  be- 
comes the  party  primarily  liable  on  the  instrument, 
and  of  course  the  maker  of  a  note  is  similarly  liable. 
(Section  60.)  The  normal  and  only  proper  way  of 
accepting  a  bill  is  in  writing  on  the  bill  signed  by 
the  drawee,  but  the  statute  holds  a  written  promise 
by  the  drawee  though  not  on  the  bill  binding  upon 
one  to  whom  it  is  shown  and  who  on  the  faith  of  it 
receives  the  bill  for  value.  (Sections  134, 135.)  The 
statute  (Sections  139-142)  distinguishes  general 
acceptance  from  qualified  acceptance.  A  holder  is 
entitled  to  a  general,  that  is,  an  unqualified  accept- 
ance, and  if  the  drawee  refuses  to  give  it,  may  treat 
the  bill  as  dishonored  (Sections  142-149),  but  the 
holder  may,  if  he  chooses,  take  an  acceptance  vary- 
ing from  the  tenor  of  the  bill  in  amount,  place,  time 
or  otherwise.  If  he  does  so  the  acceptor  will  be  lia- 
ble according  to  the  terms  of  his  acceptance — not 
according  to  the  terms  of  the  bill  as  originally 
drawn.  The  drawer  and  indorsers  will  be  dis- 
charged since  they  never  agreed  to  be  responsible, 
for  such  a  qualified  acceptance ;  but  they  can  assent 
to  be  so  responsible,  and  if  after  notice  of  the  quali- 
fied acceptance  they  do  not  express  dissent  to  the 
holder,  they  will  be  deemed  to  have  assented.  (Sec- 
tion 142.) 

187.  SECTION  61.  ~  [LIABILITY  OF 
DRAWER.]  The  drawer  by  drawing  the  instru- 
ment admits  the  existence  of  the  payee  and  his  then 


NEGOTIABLE  INSTRUMENTS         117 

capacity  to  endorse;  and  engages  that  on  due  pre- 
sentment the  instrument  will  be  accepted  or  paid,  or 
both,  according  to  its  tenor,  and  that  if  it  be  dishon- 
ored, and  the  necessary  proceedings  on  dishonor  be 
duly  taken,  he  will  pay  the  amount  thereof  to  the 
holder,  or  to  any  subsequent  indorser  who  may  be 
compelled  to  pay  it.  But  the  drawer  may  insert  in 
the  instrument  an  express  stipulation  negativing  or 
limiting  his  own  liability  to  the  holder. 

188.  LIABILITY  OF  A  DRAWER.  — The 
drawer  of  a  bill  orders  the  drawee  to  pay.  He  does 
not  in  words  say,  "And  I  promise  to  pay  if  the 
drawee  does  not,"  but  he  impliedly  promises  that  by 
drawing  the  bill,  and  he  may  not  only  promise  to 
pay  the  instrument  if  the  drawee  fails  to  pay  it,  but 
also  if  the  drawee  fails  to  accept  it.  A  demand  bill 
does  not  contemplate  an  acceptance,  but  a  time  bill 
(and  in  Massachusetts,  New  Hampshire  and  North 
Carolina  a  sight  bill)  does,  and  a  drawer  of  such  a 
bill  promises  in  effect,  "If  this  instrument  is  pre- 
sented for  acceptance  it  will  be  accepted,  or  if  not, 
on  due  notice  I  promise  to  pay  it ;  and,  further,  if  it 
is  not  dishonored  for  nonacceptance  and  is  pre- 
sented for  payment  at  the  day  of  maturity,  I  prom-, 
ise  that  if  it  is  not  then  paid,  on  due  notice  of  that 
fact  I  will  pay  it."  The  holder  of  such  a  bill  need 
not  present  it  for  acceptance  unless  he  likes.  He 
may  wait  until  the  day  of  maturity  and  then  simply 
present  it  for  payment ;  but  if  he  presents  it  for  ac- 
ceptance and  the  instrument  is  not  accepted,  he 
must  then  give  notice  of  dishonor,  to  the  drawer,  for 


118        NEGOTIABLE  INSTRUMENTS 

the  drawer's  obligation  is  conditional,  not  simply  on 
the  failure  of  the  drawee  to  accept  and  to  pay,  but 
also  on  proper  notice  of  such  failure  being  sent  to 
the  drawer.  The  holder,  after  failing  to  give  notice 
of  dishonor  for  nonacceptance,  cannot  thereafter 
charge  the  drawer  by  presentment  at  maturity  for 
payment,  and  giving  notice  of  nonpayment.  The 
drawer  may  expressly  put  other  conditions  limiting 
his  obligation  to  pay  the  instrument,  but  that  is  not 
common. 

189.  SECTION  62.— [LIABILITY  OF  AC- 
CEPTOR.] The  acceptor  by  accepting  the  instru- 
ment engages  that  he  will  pay  it  according  to  the 
tenor  of  his  acceptance;  and  admits, — (1)  The  ex- 
istence of  the  drawer,  the  genuineness  of  his  signa- 
ture, and  his  capacity  and  authority  to  draw  the  in- 
strument; and  (2)  The  existence  of  the  payee  and 
his  then  capacity  to  endorse. 

190.  ADMISSIONS  IMPLIED  BY  DRAW- 
ING, MAKING  OR  ACCEPTING.— The  drawer, 
the  maker  and  the  acceptor,  by  signing,  admit  the 
existence  of  the  payee  and  his  capacity  to  indorse 
the  instrument.  If  he  becomes  incapacitated  to  in- 
dorse after  the  instrument  is  drawn,  however,  that 
may  be  set  up  as  a  defence.  The  acceptor  further 
admits  not  only  the  existence  of  the  drawer  but  the 
genuineness  of  his  signature  and  his  capacity  and 
authority  to  draw  the  instrument.  That  is  a  mat- 
ter that  has  given  rise  to  a  good  deal  of  litigation. 
The  result  of  the  cases  prior  to  the  Negotiable  In- 
struments Law  was  generally  the  same  as  is  now 


NEGOTIABLE  INSTRUMENTS        119 

stated  in  the  statute.  The  reason  for  the  result  as 
generally  given  is  that  the  drawee  is  bound  to  know 
the  signature  of  the  drawer.  Accordingly,  if  a 
holder  for  value  presents  a  check  or  presents  a  bill 
of  exchange  to  the  drawee,  and  the  drawee  pays  it, 
the  money  cannot  be  recovered,  although  the  signa- 
ture is  forged.  The  drawee  must  look  out  for  that 
before  he  pays,  and  an  acceptor  similarly  must  be  on 
his  guard  when  he  accepts  the  instrument.  So  a 
bank  when  it  certifies  a  check  becomes  absolutely 
liable  to  pay  it  to  a  holder  in  due  course,  even 
though  the  drawer's  signature  was  forged.  (Sec- 
tions 23,  60-62.) 

191.  SECTION  63.  ~  [WHEN  PERSON 
DEEMED  INDORSER.]  A  person  placing  his 
signature  upon  an  instrument  otherwise  than  as 
maker,  drawer  or  acceptor,  is  deemed  to  be  an  in- 
dorser,  unless  he  clearly  indicates  by  appropriate 
words  his  intention  to  be  bound  in  some  other 
capacity. 

192.  COMMENT  ON  SECTION  63.— There 
have  been  many  cases  in  the  past  raising  the  ques- 
tion of  the  liability  intended  to  be  assumed  by  one 
who  placed  his  name  on  negotiable  paper  in  an  un- 
usual way.  Most  of  these  cases  it  is  true  related  to 
what  are  called  irregular  indorsements  in  the  fol- 
lowing section  of  the  statute.  But  it  is  possible  for 
one  to  become  a  party  to  an  instrument  as  a  guar- 
antor. So  one  who  signs  on  the  back  of  negotiable 
paper  may  intend  to  assume  the  liability  of  a  maker 


120        NEGOTIABLE  INSTRUMENTS 

rather  than  an  indorser.  It  is  possible  under  the 
Negotiable  Instruments  Law  to  give  effect  to  any 
such  intentions  if  they  are  clearly  manifested,  but 
this  section  of  the  statute  provides  a  rule  of  pre- 
sumption applicable  where  it  is  not  made  perfectly 
clear  that  another  meaning  is  intended. 

193.  SECTION  64.— [LIABILITY  OF  IR- 
REGULAR INDORSER.]  Where  a  person,  not 
otherwise  a  party  to  an  instrument,  places  thereon 
his  signature  in  blank  before  delivery  he  is  liable  as 
indorser,  in  accordance  with  the  following  rules: — 
(1)  If  the  instrument  is  payable  to  the  order  of  a 
third  person,  he  is  liable  to  the  payee  and  to  all  sub- 
sequent parties.  (2)  If  the  instrument  is  payable 
to  the  order  of  the  maker  or  drawer,  or  is  payable 
to  bearer,  he  is  liable  to  all  parties  subsequent  to  the 
maker  or  drawer.  (3)  If  he  signs  for  the  accommo- 
dation of  the  payee,  he  is  liable  to  all  parties  subse- 
quent to  the  payee. 

NOTE. — In  the  Illinois  Act  sub-section  (1)  and  (2)  are 
as  follows:  (1)  If  the  instrument  is  a  note  or  bill  payable 
to  the  order  of  a  third  person,  or  an  accepted  bill,  payable 
to  the  order  of  the  drawer,  he  is  liable  to  the  payee  and  to 
all  subsequent  parties.  (2)  If  the  instrument  is  a  note  or 
unaccepted  bill  payable  to  the  order  of  the  maker  or  drawer, 
or  is  payable  to  bearer,  he  is  liable  to  all  parties  subsequent 
to  the  maker  or  drawer. 

194.  ANOMALOUS  OR  IRREGULAR  IN- 
DORSEMENTS.—Ordinarily  an  indorsement  is 
both  a  transfer  and  a  special  kind  of  guarantee,  but 
it  may  be  one  only  of  these  things  or  it  may  be 
neither.  Thus,  an  indorsement  without  recourse  is 
a  transfer  but  is  not  a  guarantee.  An  anomalous  in- 
dorsement is  not  a  transfer  but  it  is  a  guaranty.  So 


NEGOTIABLE  INSTRUMENTS         121 

an  indorsement  of  an  instrument  negotiable  by  de- 
livery, though  unnecessary  to  transfer  the  instru- 
ment, is  effective  to  create  the  liabilities  of  an  in- 
dorser.  (Section  67.)  And  there  is  one  kind  of  in- 
dorsement that  is  neither  a  transfer  nor  a  guarantee, 
but  merely  a  receipt.  Suppose  a  check  is  presented 
by  the  payee  at  the  bank  on  which  it  is  drawn.  The 
bank  asks  for  the  payee's  indorsement.  Now  that 
signature  will  not  enable  the  bank  under  these  cir- 
cumstances to  sue  the  indorser,  even  though  the 
drawer  had  in  fact  no  funds  or  even  though  the 
drawer's  signature  was  forged;  it  is  simply  an  ac- 
knowledgment or  receipt  for  the  money.  But  the 
anomalous  or  irregular  indorsement  though  not  a 
transfer  is  a  guaranty  of  the  same  sort  that  an  un- 
qualified regular  indorsement  is.  It  is  called  anoma- 
lous or  irregular  because  it  is  made  by  one  who  is 
not  a  party  to  the  instrument  nor  a  holder  of  it.  A 
makes  a  note  payable  to  bank  B  and  gets  C  to  sign 
at  the  time  of  the  transaction  as  an  indorser  for 
security.  C  was  never,  of  course,  a  holder  of  that 
instrument,  and  consequently  the  indorsement  is 
not  a  transfer.  The  same  practical  result  might  be 
reached  and  often  is  reached  by  a  regular  indorse- 
ment. A  might  have  made  that  note  payable  to  C 
and  then  got  C  to  indorse  it  to  the  bank.  Under  the 
transaction  in  that  form  the  bank  would  as  before 
have  the  signatures  of  A  and  C,  but  here  C  would 
be  a  regular  indorser,  as  he  was  the  payee  of  the 
instrument.    Before  the  passage  of  the  Negotiable 


122        NEGOTIABLE  INSTRUMENTS 

Instruments  Law  an  anomalous  indorser  was  held 
in  some  States  a  joint  maker  of  the  instrument,  in 
others  varying  kinds  of  obligations  were  held  to  be 
created  by  such  an  indorsement.  This  led  to  all 
.kinds  of  trouble;  but  that  is  changed  by  the  Nego- 
tiable Instruments  Law,  which  provides  in  Section 
63  that  where  a  person  not  otherwise  a  party  to  an 
instrument  places  thereon  his  signature  in  blank  be- 
fore delivery,  he  is  liable  as  an  indorser  to  parties 
who  take  the  instrument  subsequently;  and  he  is 
entitled  to  the  same  diligence  on  the  part  of  the 
holder  in  order  to  charge  him  as  is  required  in  order 
to  charge  a  regular  indorser.  It  is  broadly  provided 
also  in  Section  64  that  if  a  person  places  his  signa- 
ture on  an  instrument  otherwise  than  as  drawer  or 
acceptor  he  is  bound  as  an  indorser,  unless  he 
clearly  indicates  by  appropriate  words  another  in- 
tention. 

195.  SECTION  65.— [WARRANTY  WHERE 
NEGOTIATION  BY  DELIVERY,  ET  CET- 
ERA.] Every  person  negotiating  an  instrument  by 
delivery  or  by  a  qualified  indorsement,  warrants : — 
(1)  That  the  instrument  is  genuine  and  in  all  re- 
spects what  it  purports  to  be;  (2)  That  he  has  a 
good  title  to  it;  (3)  That  all  prior  parties  had  ca- 
pacity to  contract;  (4)  That  he  has  no  knowledge 
of  any  fact  which  would  impair  the  validity  of  the 
instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only,  the 
warranty  extends  in  favor  of  no  holder  other  than 
the  immediate  transferee. 


NEGOTIABLE  INSTRUMENTS        123 

The  provisions  of  subdivision  three  of  this  section 
do  not  apply  to  persons  negotiating  public  or  cor- 
poration securities,  other  than  bills  and  notes. 

196.  WARRANTIES.— The  law  of  warranty  in 
regard  to  negotiable  instruments  is  based  on  the 
same  principle  as  the  law  of  warranty  in  the  sale  of 
chattel  property.  If  a  seller  induces  a  buyer  to 
purchase  by  making  a  representation  of  the  title  or 
the  quality  of  the  goods  sold,  he  becomes  a  war- 
rantor of  the  truth  of  his  statements.  Had  he 
merely  expressed  an  opinion  instead  of  making  a 
positive  affirmation  he  would  not  have  been  so  lia- 
ble. The  law  also  recognizes  that  even  though  no 
express  affirmation  is  made,  the  very  act  of  offering 
goods  for  sale  carries  with  it  an  implied  repre- 
sentation. One  who  purports  to  sell  goods  impli- 
edly represents  that  he  is  the  owner,  and,  therefore, 
impliedly  warrants  his  title.  So  we  find  it  recog- 
nized in  the  law  of  negotiable  paper  that  one  who 
sells  it  impliedly  warrants  his  title  and  warrants 
that  the  instrument  is  what  it  seems  to  be ;  namely, 
a  genuine  instrument;  and  that  the  parties  who 
purport  to  have  signed  have  actually  signed  andj 
have  the  capacity  to  sign.  There  is  no  warranty, 
however,  implied  of  the  solvency  of  the  parties,  nor 
is  there  a  warranty  that  none  of  the  parties  has  a 
defence  to  the  instrument  unknown  to  the  seller. 

197.  SECTION  66.— [LIABILITY  OF  GEN- 
ERAL INDORSER.]  Every  indorser  who  indorses 
without  qualification,  warrants  to  all  subsequent 


124        NEGOTIABLE  INSTRUMENTS 

holders  in  due  course :  (1)  The  matters  and  things 
mentioned  in  subdivision  one,  two  and  three  of  the 
next  preceding  section;  and  (2)  That  the  instru- 
ment is  at  the  time  of  his  indorsement  valid  and 
subsisting. 

And,  in  addition,  he  engages  that  on  due  present- 
ment, it  shall  be  accepted  or  paid,  or  both,  as  the 
case  may  be,  according  to  its  tenor,  and  that  if  it  be 
dishonored,  and  the  necessary  proceedings  on  dis- 
honor be  duly  taken,  he  will  pay  the  amount  thereof 
to  the  holder,  or  to  any  subsequent  indorser  who 
may  be  compelled  to  pay  it. 

198.  LIABILITIES  OF  AN  INDORSER.— An 
indorser's  main  obligation  is,  of  course,  an  under- 
taking that  on  presentment  a  bill  shall  be  accepted 
or  shall  be  paid  at  maturity,  or  both,  and  similarly 
he  engages  that  a  promissory  note  shall  be  paid  at 
maturity  on  presentment,  subject  in  both  cases  to 
proper  notice  being  given  of  dishonor.  He  also 
makes  certain  warranties  in  regard  to  the  instru- 
ment itself,  and  even  one  who  indorses  without  re- 
course, or  who  transfers  by  mere  delivery  paper 
payable  to  bearer,  makes  certain  warranties,  the 
most  important  of  which  is  that  the  instrument  is 
genuine  and  is  what  it  purports  to  be.  Accordingly, 
if  there  is  any  forged  signature  on  negotiable  paper, 
one  who  indorses  without  recourse  would  be  liable 
to  the  purchaser  for  such  damage  as  the  forgery 
caused.  One  who  sold  such  an  instrument  without 
any  indorsement  would  also  be  liable  to  the  same 
extent.    Furthermore,  it  is  warranted  by  the  trans- 


NEGOTIABLE  INSTRUMENTS        125 

ferrer,  whether  an  indorser  or  not,  that  he  has  title 
to  the  instrument,  and  that  all  the  prior  parties  had 
capacity  to  contract.  If  the  instrument  is  simply 
transferred  without  indorsement,  the  seller  also 
warrants  that  he  has  no  knowledge  of  any  fact 
which  would  impair  the  validity  of  the  instrument 
and  render  it  valueless.  The  provision  as  to  capac- 
ity to  contract  does  not  apply  to  the  sale  of  bonds  of 
corporations  or  public  securities,  but  the  provision 
as  to  genuineness  would  apply  to  any  negotiable  in- 
strument which  is  sold.  (Section  65.)  Indeed,  the 
law  is  the  same  on  this  point  when  any  personal 
property  is  sold. 

199.  SECTION  67.— [LIABILITY  OF  IN- 
DORSER WHERE  PAPER  NEGOTIABLE  BY 
DELIVERY.]  Where  a  person  places  his  indorse- 
ment on  an  instrument  negotiable  by  delivery  he 
incurs  all  the  liabilities  of  an  indorser. 

200.  SECTION  68.— [ORDER  IN  WHICH 
INDORSERS  ARE  LIABLE.]  As  respects  one 
another  indorsers  are  liable  prima  facie  in  the  order 
in  which  they  indorse ;  but  evidence  is  admissible  to 
show  that  as  between  or  among  themselves  they 
have  agreed  otherwise.  Joint  payees  or  joint  in- 
dorsees who  indorse  are  deemed  to  indorse  jointly 
and  severally. 

201.  ILLUSTRATIONS  OF  THE  PROVI- 
SIONS OF  SECTION  68.— Indorsers,  as  between 
themselves,  are  bound  in  a  fixed  order.  That  is  gen- 
erally the  order  in  which  the  names  appear  on  the 
paper,  but  conceivably  it  might  not  be.     Thus,  a 


126        NEGOTIABLE  INSTRUMENTS 

second  indorser   might   place   his   name   above  a 
prior  indorsement,  but  that  would  not  render  him  a 
prior  indorser.    So,  also,  several  indorsers  might  be 
jointly  liable.    They  may  all  have  indorsed  as  co- 
sureties.   In  that  case,  as  between  one  another,  they 
would  have  to  share  the  loss  equally ;  but  generally 
as  between  themselves  indorsers  are  liable  in  the 
order  in  which  their  names  appear.     The  last  in- 
dorser can  sue  the  preceding  one  and  so  on  (Section 
121),  but  so  far  as  the  holder  is  concerned  this  order 
makes  no  difference.     He  can  charge  all  the  in- 
dorsers at  once  on  dishonor  of  the  instrument,  and 
he  can  bring  an  action  or  actions  against  all  of  them 
at  the  same  time.    (Section  84.)    He  may  sue  any 
one  or  all  of  them  before  he  sues  the  partj'-  primarily 
liable,  or  he  may  sue  the  indorsers  at  the  same  time 
that  he  sues  the  party  primarily  liable;  and  the 
holder  may  get  judgment  against  all  of  these  parties 
for  the  full  amount  of  the  bill  or  note,  the  only  limit 
to  his  rights  being  that  he  can  collect  on  his  judg- 
ments only  the  full  amount  of  the  instrument. 

202.  SECTION  69.— [LIABILITY  OF  AN 
AGENT  OR  BROKER.]  Where  a  broker  or  other 
agent  negotiates  an  instrument  without  endorse- 
ment he  incurs  all  the  liabilities  prescribed  by  sec- 
tion sixty-five  of  this  act,  unless  he  discloses  the 
name  of  his  principal,  and  the  fact  that  he  is  acting 
only  as  agent. 

203.  COMMENT  ON  SECTION  69.— Though 
the  law  of  undisclosed  principal  does  not  apply  to 
obligations  on  negotiable  paper  (the  rule  as  to  them 


NEGOTIABLE  INSTRUMENTS        127 

being  that  only  the  party  named  on  the  paper  as 
contracting  is  bound  whether  he  be  in  fact  principal 
or  agent)  the  obligations  named  in  Section  65  are 
extrinsic  and  collateral,  not  on  the  paper  itself.  Ac- 
cordingly if  an  agent  does  not  disclose  his  principal 
when  he  sells  a  negotiable  instrument  he  would  be 
personally  liable  as  a  warrantor,  but  if  the  agent 
was  acting  within  his  express  or  implied  authority 
the  principal  also  would  be  liable. 

Article  VI — Presentment  for  Payment 

204.  SECTION  70.— [EFFECT  OF  WANT 
OF    DEMAND    ON    PRINCIPAL    DEBTOR.] 

Presentment  for  payment  is  not  necessary  in  order 
to  charge  the  person  primarily  liable  on  the  instru- 
ment ;  but  if  the  instrument  is,  by  its  terms,  payable 
at  a  special  place,  and  he  is  able  and  willing  to  pay 
it  there  at  maturity,  such  ability  and  willingness  are 
equivalent  to  a  tender  of  payment  upon  his  part. 
But  except  as  herein  otherwise  provided,  present- 
ment for  payment  is  necessary  in  order  to  charge 
the  drawer  and  indorsers. 

NOTE. — In  the  Illinois  Act  after  the  word  "instrument" 
are  inserted  the  words:  "except  in  the  case  of  bank  notes." 
In  the  Kansas,  New  York  and  Ohio  Acts  after  the  word 
"maturity"  are  inserted  the  words:  "and  has  funds  there 
available  for  that  purpose."  In  the  Wisconsin  Act  all  of  the 
first  sentence  after  the  words  "on  the  instrument"  is 
omitted. 

205.  PRESENTMENT  UNNECESSARY  TO 
HOLD  PRIMARY  PARTY.— The  party  primarily 
liable  may  be  sued  without  any  previous  demand  on 
the  maturity  of  the  instrument.    This  is  true  even 


128        NEGOTIABLE  INSTRUMENTS 

though  such  party  does  not  know  who  is  the  holder 
and  the  instrument  is  not  made  payable  at  a  par- 
ticular place,  so  that  tender  of  payment  is  impossi- 
ble. It  is  also  true  though  the  instrument  is  pay- 
able on  demand.  Demand  paper  is  payable  without 
a  demand,  paradoxical  as  it  may  seem. 

Presentment,  before  the  passage  of  the  Negotia- 
ble Instruments  Law,  in  some  jurisdictions  at  least, 
was  necessary  to  charge  the  party  primarily  liable 
if  the  instrument  was  payable  at  a  particular  place ; 
but  that  is  not  so  now.  Even  under  the  Negotiable 
Instruments  Law,  however,  if  presentment  was  in 
express  terms  required  by  the  instrument  presum- 
ably it  would  have  to  be  made.  It  would  be  possible 
to  write  an  instrument  with  such  a  condition,  but 
that  is  not  done  in  the  ordinary  forms  of  notes. 

206.  PRESENTMENT  IS  NECESSARY  TO 
CHARGE  PARTIES  SECONDARILY  LIABLE. 
— In  order  to  charge  parties  secondarily  liable,  on 
the  other  hand,  presentment  to  the  party  primarily 
liable  is  always  necessary  unless  the  contrary  is 
provided.  It  is  perfectly  possible  here,  also,  to  pro- 
vide in  the  instrument  contrary  to  the  general  rule. 
An  indorser  may  agree  to  be  liable  without  present- 
ment to  the  maker. 

207.  TENDER. — Damages  may  be  stopped  or 
limited  at  any  time  by  tender.  Tender  stops  inter- 
est and  stops  a  right  to  any  additional  damages  sub- 
sequent to  the  time  of  tender.  It  is  sometimes  sup- 
posed that  tender  discharges  a  debt,  but,  of  course, 


NEGOTIABLE  INSTRUMENTS        129 

that  is  not  so.  What  is  tender?  Strictly,  tender  is 
an  offer  of  an  amount  of  legal  tender  money  equal 
to  the  indebtedness  of  the  person  tendering.  Noth- 
ing but  legal  tender  is  sufficient,  but  unless  the 
creditor  requests  legal  tender,  or  rather  unless  he 
objects  to  the  form  in  which  tender  is  made,  an  offer 
of  any  ordinary  medium  of  payment,  such  as  a  cer- 
tified check,  would  be  sufficient.  The  creditor  has 
a  right  to  say,  *T  want  legal  tender  offered  to  me," 
but  if  he  does  not  say  that  the  certified  check  will 
do  as  well.  Tender  ordinarily  implies  an  offer  to 
the  creditor  in  person,  but  not  necessarily.  Suppose 
an  instrument  is  payable  at  a  particular  place.  If 
the  debtor  goes  to  that  place  ready  and  willing  and 
able  to  offer  payment,  but  the  creditor  is  not  there, 
that  is  a  good  tender.  Accordingly,  if  a  note  is  pay- 
able at  a  bank,  and  the  maker  of  the  note  has  on 
deposit  at  that  bank  on  the  day  of  maturity  an 
amount  sufficient  to  meet  the  obligation,  that  serves 
as  an  automatic  tender.  If  the  creditor  comes  to  the 
bank  he  can  get  it ;  if  the  creditor  does  not  come,  the 
mere  fact  that  the  money  is  at  the  place  waiting  for 
him  will  stop  interest.  (Section  70.)  The  tender 
will  not  only  stop  interest  and  further  damages,  but 
it  will  also  operate  as  a  discharge  of  subsequent  par- 
ties on  the  instrument.  It  will  not  discharge  the 
debt  as  far  as  the  person  tendering  is  concerned,  nor 
as  far  as  any  prior  party  in  concerned,  but  as  to  sub- 
sequent parties  it  does  in  effect  amount  to  a  dis- 
charge. (Section  120  [5]).    The  reason  is  that  since 


130        NEGOTIABLE  INSTRUMENTS 

the  holder,  when  the  tender  was  made,  might  have 
had  his  money  if  he  had  wanted  it,  it  is  unfair,  when 
the  only  reason  he  does  not  get  paid  is  his  own 
refusal  or  neglect,  that  he  should  thereafter  charge 
a  subsequent  party.  In  order  to  be  valid,  the  tender 
must  be  sufficient  in  amount. 

208.  KINDS  OF  INTEREST.— Not  only  are 
there  questions  arising  in  regard  to  the  principal 
sum  which  is  due  upon  a  note,  but  there  are  ques- 
tions in  regard  to  interest.  Interest  is  of  two  sorts : 
the  first  is  interest  agreed  upon  by  the  parties, 
sometimes  called  conventional  interest,  which 
means  interest  contracted  for;  the  second  kind  of 
interest  is  given  by  the  law  as  damages  irrespective 
of  any  agreement  on  the  part  of  the  parties.  An- 
other kind  of  charge  which  is  somewhat  like  in- 
terest in  its  nature,  though  not  exactly  the  same, 
consists  of  percentages  allowed  in  lieu  of  what  is 
called  re-exchange,  and  we  shall  say  a  few  words  in 
regard  to  each  one  of  these. 

209.  CONVENTIONAL  INTEREST.— In  the 
first  place,  conventional  interest  must  be  reserved  in 
the  note.  Unless  the  instrument  says  something  to 
the  contrary  the  interest  will  run  from  the  date  of 
the  instrument ;  that  is  so  provided  in  section  1 7  of 
the  statute.  If  the  instrument  is  not  dated,  then 
interest  will  run  from  delivery,  always  assuming 
that  the  note  provides  for  interest.  A  postdated  or 
antedated  note  will  get  so  much  the  less  or  more 
interest.    If  the  note  does  not  state  how  long  the 


NEGOTIABLE  INSTRUMENTS        131 

interest  is  to  run,  as  generally  it  does  not,  it  will  run 
until  the  note  is  paid.  That  seems  obvious  where 
the  interest  is  as  high  or  higher  than  the  legal  rate, 
but  it  is  also  true  if  the  interest  is  lower  than  the 
legal  rate.  For  instance,  suppose  a  note  payable  in 
one  year  with  interest  at  5  per  cent,  is  not  paid 
at  maturity.  Had  there  been  no  interest  mentioned 
in  the  note  the  interest  from  maturity  would  run 
at  the  legal  rate  which  is  generally  6  per  cent, 
and  it  sometimes  seems  hard  to  the  holder  of  such 
a  note  that  he  should  be  worse  off  in  having  an  in- 
terest-bearing note,  so  far  as  the  period  after  ma- 
turity is  concerned,  than  a  man  would  be  who  had  a 
non-interest-bearing  note ;  but  that  is  the  rule.  The 
contract  rate  governs  not  only  before  maturity  but 
after.  When  the  note  is  reduced  to  judgment,  how- 
ever, the  judgment  will  bear  interest  at  the  legal 
rate. 

210.  CONSTRUCTION  OF  AMBIGUOUS 
AGREEMENTS  FOR  INTEREST.— A  note  not 
infrequently  reads  simply,  "with  interest."  That  is 
understood  to  mean  with  interest  at  the  legal  rate. 
But  sometimes  this  case  is  presented:  there  is  a 
blank  form  used  and  the  form  reads,  "With  in- 
terest at ,"  and  does  not  mention  any  rate,  but 

leaves  a  blank,  or  reads  "With interest."    In 

the  first  place,  that  is  an  incomplete  instrument,  and 
any  one  who  takes  it  with  those  blanks  in  it  will  be 
obliged  to  find  out  at  his  peril  what  is  the  real  au- 
thority to  fill  out  the  blanks.    If  the  parties  really 


132        NEGOTIABLE  INSTRUMENTS 

bargained  for  5  or  3  per  cent,  interest,  that  is  all  the 
interest  that  can  be  recovered,  and  if  they  bargained 
that  there  should  be  no  interest  we  presume  that  also 
would  be  provable  and  that  no  interest  could  be  re- 
covered. If  the  blanks  were  filled  out  before  matur- 
ity and  a  holder  in  due  course  took  the  instrument, 
he  would  be  entitled  to  recover  on  the  instrument 
according  to  the  way  the  blanks  were  actually  filled 
out.  We  may  suppose,  however,  that  the  parties 
when  they  made  the  note  made  no  agreement  as  to 
interest, — said  nothing  about  it;  there  would  then 
be  no  evidence  of  the  rights  of  the  parties  except 
what  the  note  itself  furnished.  We  suppose  in  that 
case  interest  at  the  legal  rate  would  be  allowed, 
though  it  has  been  argued  that  an  instrument  read- 
ing, "With  interest  at  per  cent.,"  or  "With 

interest,"  until  the  blank  is  filled  out,  in  effect 

says  with  interest  at  no  per  cent.,  or  with  no  inter- 
est. It  has  been  decided  in  one  case,  however,  that 
the  legal  rate  is  the  fair  meaning. 

211.  INTEREST  AS  DAMAGES.— Now  about 
interest  recoverable  as  damages.  It  follows  from 
what  we  have  already  said  that  such  interest  is  re- 
coverable only  in  case  there  is  no  agreement  for 
interest  in  the  note  at  all.  In  such  a  case  interest  at 
the  legal  rate  runs  from  the  maturity  of  time  paper, 
and  on  demand  paper  runs  from  delivery. 

212.  CALCULATION  OF  INTEREST.— A 
question  has  been  raised  as  to  the  calculation  of  in- 
terest.   Interest  is  ordinarily  calculated  by  business 


NEGOTIABLE  INSTRUMENTS        133 

and  financial  people  on  the  assumption  that  there 
are  three  hundred  and  sixty  days  in  the  year.  The 
result  of  that  method  of  calculation  is  frequently 
that  a  little  more  interest  is  charged  than  is  actually 
earned;  that  is,  1-360  of  6  per  cent,  is  charged  for 
each  day  instead  of  1-365.  This  trivial  inaccuracy 
in  the  calculation  of  interest  ordinarily  makes  no 
difference,  but  it  becomes  of  importance  in  certain 
States  where  usury  laws  forbid  charging  more  than 
a  given  rate  of  interest,  say  6  per  cent.  In  a  State 
where  such  a  law  prevails  it  might  be  usurious  to 
charge  interest  calculated  on  the  basis  of  three  hun- 
dred and  sixty  days  to  the  year,  and  probably  as  a 
matter  of  strict  law,  even  where  there  is  no  usury 
law,  if  any  one  liable  to  pay  interest  insisted  on 
having  his  interest  calculated  exactly  on  the  basis 
of  three  hundred  and  sixty-five  days  in  the  year,  so 
that  he  would  pay  only  1-365  of  the  annual  rate  for 
each  day  instead  of  1-360,  as  commonly  calculated, 
he  would  be  entitled  to  make  that  demand.  In  a 
few  States  special  statutes  have  been  passed  legaliz- 
ing the  ordinary  method  of  calculating  interest. 
Even  without  such  statutes  courts  have  generally^ 
concluded  that  "six  per  cent."  as  used  in  a  usury 
statute  means  six  per  cent,  as  ordinarily  calculated 
by  business  men. 

213.  RE-EXCHANGE.— There  is  one  other 
kind  of  damages,  damages  given  in  lieu  of  re-ex- 
change. That  involves  an  explanation  of  what  is 
meant  by  re-exchange.    If  a  note  is  payable  in  one 


134        NEGOTIABLE  INSTRUMENTS 

city  and  there  are  half  a  dozen  indorsers  on  it  and 
the  note  is  dishonored,  the  holder  not  only  has  a 
claim,  after  charging  the  indorsers,  against  every 
one  of  them  for  the  amount  of  the  bill,  but  also  he 
has  a  right  to  the  amount  of  the  bill  in  the  place 
where  the  instrument  was  payable.  Now  suppose 
the  indorsers  live  in  several  other  cities,  as  New 
York,  Philadelphia  and  Chicago.  The  way  that  is 
supposed  to  be  adjusted  unless  this  method  is 
changed  by  statute  is  this:  the  holder  in  the  city 
where  the  instrument  is  payable  has  a  right  to  draw 
a  draft  on  the  indorsers  in  New  York,  Chicago  and 
Philadelphia  for  such  an  amount  as  will  equal  the 
face  of  the  note  if  the  draft  were  discounted  in  the 
place  where  the  note  was  payable;  that  is,  the 
amount  of  the  draft  would  be  the  face  of  the  note 
plus  exchange  on  the  places  where  the  indorsers 
live.  In  lieu  of  that  right  to  re-exchange,  the  stat- 
utes of  many  States  provide  that  a  certain  per  cent, 
on  a  negotiable  instrument  may  be  added  in  charg- 
ing a  party  secondarily  liable  if  he  lives  at  a  dis- 
tance from  the  place  where  the  instrument  is  pay- 
able, the  percentage  varying  with  the  distance. 

214.  PROTEST  FEES.— Protest  fees  also  may 
be  added  as  part  of  the  damages  due  on  an  instru- 
ment, and  become  part  of  the  obligation  of  all  par- 
ties to  it. 

215.  SECTION  71.  —  [PRESENTMENT 
WHERE  INSTRUMENT  IS  NOT  PAYABLE 
ON  DEMAND  AND  WHERE  PAYABLE  ON 


NEGOTIABLE  INSTRUMENTS        135 

DEMAND.]  Where  the  instrument  is  not  payable 
on  demand,  presentment  must  be  made  on  the  day 
it  falls  due.  Where  it  is  payable  on  demand,  pre- 
sentment must  be  made  within  a  reasonable  time 
after  its  issue,  except  that  in  the  case  of  a  bill  of 
exchange,  presentment  for  payment  will  be  suffi- 
cient if  m^ade  within  a  reasonable  time  after  the  last 
negotiation  thereof. 

NOTE. — In  the  Nebraska  Act  all  of  the  section  after 
the  words  "reasonable  time  after  its  issue"  is  omitted.  In 
the  Vermont  Act  instead  of  the  last  five  words  of  the  section 
are  substituted:  "after  its  issue  in  order  to  charge  the 
drawer." 

216.  DATE  OF  MATURITY  IMPORTANT 
FOR  THREE  QUESTIONS.— The  next  question 
to  determine  is  when  an  instrument  is  overdue.  That 
is  necessary  for  several  purposes,  and  unfortunately 
under  our  law  an  instrument  may  not  be  overdue 
for  all  these  purposes  at  the  same  moment.  There 
is  a  good  deal  of  confusion  about  overdue  paper 
because  these  several  questions  which  may  arise 
with  reference  to  overdue  paper  are  not  kept  apart. 
The  first  and  primary  question  in  regard  to  when 
paper  is  overdue  is.  When  can  you  sue  the  party  pri- 
marily liable?  The  second  question  is,  When  can 
you  give  notice  of  dishonor  to  parties  secondarily 
liable  that  the  instrument  has  been  dishonored  at 
maturity?  The  third  question  is.  When  is  the  in- 
strument subject  to  personal  defences  if  purchased 
thereafter? 

217.  IN  EUROPE  OVERDUE  FOR  ALL 
PURPOSES  AT  THE  SAME  TIME.— Under  the 


136        NEGOTIABLE  INSTRUMENTS 

practice  on  the  continent  of  Europe,  (see  paragraph 
321),  of  marking  on  the  face  of  a  bill  the  fact  of 
its  dishonor  or  its  payment  on  presentment,  the 
difficulties  that  beset  our  law  in  regard  to  this  mat- 
ter do  not  occur.  The  answers  to  each  of  these 
three  questions  on  the  continent  of  Europe  will 
always  be  the  same.  As  soon  as  there  is  a  right  of 
action  against  the  maker  then  will  always  be  the 
time  to  give  notice,  and  thereafter  the  instrument 
will  always  pass  subject  to  equities.  But  now  let 
us  see  how  it  works  in  this  country. 

218.  WHEN  RIGHT  OF  ACTION  ARISES 
IN  THE  UNITED  STATES.— It  is  the  rule  in 
simple  contracts  that  when  a  man  contracts  to  do 
something  on  a  given  day  he  has  until  the  last 
minute  of  that  day  to  satisfy  his  obligation.  That 
is  true  both  of  contracts  to  pay  money  and  of  con- 
tracts to  do  other  things.  If  by  a  simple  contract 
one  agrees  to  pay  $1,000  on  the  2d  of  January,  he 
cannot  be  sued  on  that  obligation  until  after  the 
last  minute  of  the  2d  of  January  has  expired,  for 
until  that  last  minute  it  is  possible  he  may  fulfill  his 
contract.  The  result  is  that  a  right  of  action  will 
not  accrue  on  that  contract  until  the  3d  of  January. 
That  principle,  unfortunately,  has  been  applied 
rather  generally  to  negotiable  instruments.  If  a 
note  is  by  its  terms  payable  on  the  2d  of  January 
the  general  rule  is  that  no  action  can  be  begun 
against  the  parties  until  the  3d  of  January.  The  in- 
strument is  not  overdue  so  far  as  the  maker  is  con- 


NEGOTIABLE  INSTRUMENTS        137 

cerned  until  then.  That  is  probably  contrary  to  the 
cheory  and  customs  of  bankers  and  merchants.  The 
cheory  of  bankers  and  merchants  is  that  the  maker 
of  the  instrument  agrees  that  he  will  pay  it  on  pre- 
sentment on  the  2d  of  January,  that  the  maker  is  not 
entitled  to  the  last  minute  of  the  day,  that  he  must 
be  ready  at  the  beginning  of  the  business  day,  and 
that  whenever  his  creditor  presents  that  instrument 
to  him  on  that  day  he  must  pay  it.  Now  the  law  in 
Massachusetts  and  Maine,  unlike  the  law  of  most  of 
the  United  States,  has  to  some  extent  recognized 
this  custom.  It  has  recognized  it  to  this  extent :  if 
there  is  an  actual  presentment  on  the  2d  of  January 
and  dishonor,  a  right  of  action  against  the  maker 
arises  immediately  in  favor  of  the  holder;  he  does 
not  have  to  wait  until  the  last  minute  of  the  day,  and 
therefore  does  not  have  to  wait  until  the  3d  of  Janu- 
ary to  sue.  But  it  is  law  in  Massachusetts  and 
Maine,  as  it  is  elsewhere,  that  if  presentment  is  not 
made  on  the  2d  of  January  (and  under  the  Nego- 
tiable Instruments  Law  there  is  in  general  no  reason 
to  make  presentment  except  to  charge  the  indor- 
sers,  and  therefore  a  note  without  indorsers  need 
not  be  presented)  the  maker  is  not  liable  to  suit 
until  the  3d  of  January.  The  day  of  maturity  is  also 
affected  by  Sundays  and  holidays.  If  the  day  of 
maturity  falls  on  Sunday  or  a  holiday,  the  instru- 
ment is  not  payable  until  the  next  business  day,  and 
time  instruments  payable  on  Saturday  must  also  be 
presented  on  the  next  business  day.    (Section  85.) 


138        NEGOTIABLE  INSTRUMENTS 

So  much  for  an  instrument  being  overdue  for  the 
purpose  of  a  right  of  action  against  the  party  pri- 
marily liable. 

219.  WHEN  INSTRUMENT  IS  OVERDUE 
FOR  OTHER  PURPOSES.— Secondly  when  is  an 
jinstrument  overdue  for  the  purpose  of  charging  in- 
dorsers?  For  that  purpose  it  is  everywhere  over- 
due as  soon  as  it  is  presented  and  dishonored  on  the 
day  of  maturity  (Sections  71,  83,  102),  and  thirdly 
when  it  is  overdue  for  the  purpose  of  letting  in 
equities.  Everywhere  but  in  Massachusetts,  so  far 
as  it  has  been  decided,  the  instrument  is  overdue  for 
the  purpose  of  letting  in  equities  only  on  the  day 
after  that  on  which  it  falls  due,  that  is,  on  the  3d  of 
January.  A  purchaser  on  the  2d  of  January,  unless 
he  had  notice  that  the  instrument  had  been  pre- 
sented and  dishonored,  would  be  a  holder  in  due 
course.  One  in  Massachusetts  who  purchases  on 
the  2d  of  January  is  not  a  holder  in  due  course,  un- 
less Section  52  of  the  Negotiable  Instruments  Law 
has  changed  the  law  previously  existing  in  that 
State. 

220.  WHERE  AN  INSTALLMENT  OR  IN- 
TEREST IS  UNPAID.— One  may  suppose  some 
rather  special  cases  in  regard  to  overdue  paper ;  for 
instance,  suppose  an  instrument  payable  in  install- 
ments and  one  installment  overdue  and  unpaid.  Is 
that  instrument,  as  a  whole,  dishonored?  The  an- 
swer to  that  is,  yes.  On  the  other  hand,  if  merely 
interest  is  due  and  unpaid  the  note  is  not  dishon- 


NEGOTIABLE  INSTRUMENTS        139 

ored.  A  case  arose  in  Wisconsin  where  the  instru- 
ment provided  that  if  the  interest  was  unpaid  the 
note  should  thereupon  become  due.  The  interest 
was  unpaid  and  the  note  was  purchased  before  the 
day  it  was  due  by  its  original  terms,  but  the  Wis- 
consin court  held  that  the  purchaser  was  not  a 
holder  in  due  course.  He  had  bought  after  matur- 
ity, since  the  non-payment  of  interest  made  the 
whole  note  due. 

221.  WHEN  RIGHT  OF  ACTION  ACCRUES 
ON  DEMAND  PAPER.~A  more  troublesome 
question  than  that  concerning  the  day  of  maturity 
of  time  paper  is  the  day  of  maturity  of  demand 
paper,  and  here  again  we  must  make  the  distinction 
clear  between  these  several  questions  of  when  a 
right  of  action  arises,  when  the  instrument  is  sub- 
ject to  equities,  and  when  notice  may  be  given  to 
indorsers.  On  demand  paper  a  right  of  action 
against  the  maker  arises  immediately  as  soon  as  it 
is  delivered.  By  the  terms  of  the  paper  it  might  be 
supposed  that  demand  was  a  prerequisite  to  such  a 
right  of  action,  and  on  theory  it  ought  to  be,  but  as 
has  been  said,  in  this  country  and  England  it  is  not. 
(Section  70.) 

222.  MATURITY  OF  DEMAND  PAPER  TO 
CHARGE  INDORSERS.— The  holder  may  make 
a  demand  on  the  maker  within  a  reasonable  time 
after  the  issue  of  the  instrument  for  the  purpose  of 
charging  indorsers,  the  instrument  maturing  at  any 
time  within  that  limit  that_the  holder  wishes  to  pre- 


140        NEGOTIABLE  INSTRUMENTS 

sent  it.  (Section  71.)  He  may  demand  payment  at 
once  of  the  party  primarily  liable,  and  on  his  refusal 
to  pay  and  notice  to  the  indorser,  he  will  acquire  a 
right  of  action  against  the  latter. 

223.  WHAT  IS  A  REASONABLE  TIME  FOR 
A  BILL  OF  EXCHANGE.— Section  71  of  the  stat- 
ute provides  that  in  case  of  a  bill  of  exchange  pay- 
able on  demand,  presentment  for  payment  will  be 
sufficient  if  made  within  a  reasonable  time  after  the 
last  negotiation  thereof.  That  provision  is  clearly  a 
blunder.  The  rule  before  the  passage  of  the  Nego- 
tiable Instruments  Law  was  that  a  demand  bill  of 
exchange  might  be  negotiated  as  many  times  as  the 
holder  chose  before  presentment,  provided  that  an 
unreasonable  time  never  elapsed  between  one  nego- 
tiation and  the  next ;  that  is,  it  could  be  kept  in  mo- 
tion, and  so  long  as  it  was  kept  in  motion  it  would 
not  matter  what  was  the  total  addition  of  the  short 
periods  between  the  several  indorsements.  But  this 
section  of  the  Negotiable  Instruments  Law  says 
that  it  is  all  right  if  presentment  is  made  within  a 
reasonable  time  after  the  last  negotiation.  Appar- 
ently, therefore,  we  may  have  a  demand  bill  of  ex- 
change and  hold  it  for  five  years  and  then  negotiate 
it,  and  everything  will  be  all  right  if  the  bill  is  pre- 
sented within  a  reasonable  time  after  the  last  nego- 
tiation. 

224.  SECTION  72.— [WHAT  CONSTI- 
TUTES A  SUFFICIENT  PRESENTMENT.] 
Presentment  for  payment,  to  be  sufficient,  must  be 


NEGOTIABLE  INSTRUMENTS        141 

made: — (1)  By  the  holder,  or  by  some  person  au- 
thorized to  receive  payment  on  his  behalf.  (2)  At  a 
reasonable  hour  on  a  business  day.  (3)  At  a  proper 
place  as  herein  defined.  (4)  To  the  person  primar- 
ily liable  on  the  instrument  or  if  he  is  absent  or  inac- 
cessible, to  any  person  found  at  the  place  where  the 
presentment  is  made. 

225.  PRESENTMENT  FOR  PAYMENT.— 
Presentment  for  payment  is,  as  we  have  said,  neces- 
sary to  charge  parties  secondarily  liable.  It  may  be 
asked  when  presentment  must  be  made,  to  whom  it 
must  be  made,  by  whom  it  must  be  made,  and  the 
place  where  it  must  be  made. 

226.  TIME  OF  PRESENTMENT.— As  to  the 
time,  it  must  be  at  maturity  of  the  instrument,  if 
the  instrument  is  a  time  bill,  and  if  it  is  a  demand 
instrument  presentment  must  be  made  within  a 
reasonable  time.  (Section  71.)  The  hour  of  the 
day  when  presentment  is  made  must  be  reasonable. 
(Section  72  [2].)  What  is  a  reasonable  hour  of  the 
day  may  depend  on  who  is  the  drawee.  In  Chicago 
a  case  arose  where  it  appeared  that  it  was  the  busi- 
ness custom  of  banks  to  remain  open  between  3  and 
6  o'clock,  having  some  one  in  charge  for  the  pur- 
pose of  receiving  presentment  of  instruments  which 
had  been  rejected  at  the  Clearing  House.  It  was 
held  in  view  of  this  custom  that  a  presentment  with- 
in these  afternoon  hours  was  presentment  at  a 
reasonable  hour  of  the  day.  Unless,  however,  it  was 
the  custom  of  the  banks  to  stay  open  after  3  o'clock 


142        NEGOTIABLE  INSTRUMENTS 

it  would  not  be  reasonable  to  seek  to  present  to  the 
bank,  as  the  party  primarily  liable  on  the  instru- 
ment, after  3  o'clock  in  the  day.  (See  also  Section 
75.)  But  if  the  drawee  was  a  business  man  in  the 
same  city,  and  the  normal  hours  of  his  business  ex- 
^ tended  until  5  or  6  o'clock,  presentment  as  late  as 
that  might  be  permissible. 

227.  BY  WHOM  AND  TO  WHOM  PRE- 
SENTMENT MUST  BE  MADE.— Now  by  whom 
must  presentment  be  made?  It  must  be  made,  as  is 
provided  in  Section  72  of  the  act,  by  the  holder  or 
some  person  authorized  by  him  to  receive  payment. 
It  must  be  presented  to  the  person  who  is  primarily 
liable  on  the  instrument,  or  to  the  drawee  of  the 
bill  of  exchange  or  check,  if  there  has  been  no  ac- 
ceptance of  the  bill  or  certification  of  the  check.  If 
the  person  primarily  liable  on  the  instrument  is  not 
at  the  place  where  presentment  should  be  made,  but 
somebody  else  is,  payment  should  be  demanded 
from  him.  He  may  be  the  authorized  agent  of  the 
person  primarily  liable.  If  there  are  joint  parties 
primarily  liable,  it  must  be  presented  to  both  (Sec- 
tion 78)  unless  they  are  partners,  in  which  case  pre- 
sentment to  one  is  enough.  (Section  77.)  If  the 
party  primarily  liable  is  dead  presentment  must  be 
made  to  his  executor  or  administrator.  (Section 
76.)  In  any  of  these  cases,  however,  if  a  place  of 
payment  is  specified  in  the  instrument,  presentment 
at  that  place  on  the  day  of  maturity  is  sufficient. 

228.  SECTION  73.— [PLACE  OF  PRESENT- 


NEGOTIABLE  INSTRUMENTS         143 

MENT.]  Presentment  for  payment  is  made  at  the 
proper  place: — (1)  Where  a  place  of  payment  is 
specified  in  the  instrument  and  it  is  there  presented. 
(2)  Where  no  place  of  payment  is  specified,  but  the 
address  of  the  person  to  make  payment  is  given  in 
the  instrument  and  it  is  there  presented.  (3) 
Where  no  place  of  payment  is  specified  and  no  ad- 
dress is  given  and  the  instrument  is  presented  at  the 
usual  place  of  business  or  residence  of  the  person  to 
make  payment.  (4)  In  any  other  case  if  presented 
to  the  person  to  make  payment  wherever  he  can  be 
found,  or  if  presented  at  his  last  known  place  of 
business  or  residence. 

229.  IMPORTANCE  OF  SPECIFYING  A 
PLACE  OF  PAYMENT  IN  NEGOTIABLE  IN- 
STRUMENTS.—It  is  worth  while  to  call  attention 
to  the  importance  of  having  negotiable  instruments 
always  made  payable  at  a  particular  place.  This 
simplifies  the  duty  of  the  holder.  All  he  has  to  do  is 
present  the  instrument  there.  It  is  also  an  advan- 
tage for  the  debtor,  for  all  he  has  to  do  to  make 
tender  in  order  to  stop  interest  is  to  have  money  at 
the  place  where  the  instrument  is  made  payable.  If 
there  is  no  place  of  payment  named,  each  party  is  at 
a  disadvantage,  for  the  debtor  can  never  tell  who 
may  be  holder  at  maturity;  he  has  to  depend  on 
receiving  notification  of  that,  which  may  not  be 
given  him,  and  therefore  he  is  unable  to  stop  inter- 
est because  the  note  may  be  negotiated  to  he  knows 
aot  whom.  The  creditor  is  at  a  similar  disadvan- 
tage if  no  place  of  payment  is  named,  for  he  cannot 
tell  where  to  make  presentment. 


144        NEGOTIABLE  INSTRUMENTS 

230.  SECTION  74.— [INSTRUMENT  MUST 
BE  EXHIBITED.]  The  instrument  must  be  ex- 
hibited to  the  person  from  whom  payment  is  de- 
manded, and  when  it  is  paid  must  be  delivered  up  to 
the  party  paying  it. 

231.  PRESENTMENT  INVOLVES  SHOW- 
ING THE  INSTRUMENT.— Presentment  implies 
showing  the  instrument.  It  is  not  enough  to  de- 
mand payment.  It  is  requisite  for  the  creditor  to 
say,  in  effect,  "Here  is  the  instrument  on  which 
you  are  liable  and  which  I  am  ready  to  surrender  on 
receiving  payment."  A  New  York  case  arose  a 
short  time  ago  of  an  attempted  presentment  over 
the  telephone,  and  the  party  primarily  liable  re- 
fused payment.  The  question  was  whether  the 
parties  secondarily  liable  could  be  charged  on  that 
presentment.  A  lower  court  in  New  York  held  that 
they  might  be,  that  the  showing  of  the  note  was 
waived  by  the  party  primarily  liable.  We  are  not 
sure  that  the  decision  was  right.  Presentment  is 
for  the  benefit,  not  of  the  party  primarily  liable,  but 
of  the  parties  secondarily  liable.  The  parties  sec- 
ondarily liable  have  a  right  to  say,  "We  will  not  pay 
unless  there  has  been  proper  presentment."  Now 
it  seems  that  it  can  hardly  be  proper  presentment 
unless  the  instrument  is  actually  brought  within 
reach  of  the  party  primarily  liable  and  in  effect 
offered  to  him.  If  presentment  is  good  over  the 
telephone  from  one  bank  to  another  in  New  York 
City,  why  is  it  not  good  as  between  New  York  and 


NEGOTIABLE  INSTRUMENTS        145 

Chicago,  without  sending  the  note  to  Chicago  at 
all,  where  it  is  payable? 

232.  SECTION  75.  —.  [PRESENTMENT 
WHERE  INSTRUMENT  PAYABLE  AT 
BANK.]  Where  the  instrument  is  payable  at  a 
bank,  presentment  for  payment  must  be  made  dur- 
ing banking  hours,  unless  the  person  to  make  pay- 
ment has  no  funds  there  to  meet  it  at  any  time  dur- 
ing the  day,  in  which  case  presentment  at  any  hour 
before  the  bank  is  closed  on  that  day  is  sufficient. 

NOTE. — The  Nebraska  Act  ends  with  the  words  "bank- 
ing hours." 

233.  COMMENT  ON  SECTION  75.— What  is 
meant  by  "banking  hours"  depends  upon  the  cus- 
tom of  the  place  of  payment.  Often  a  bank  trans- 
acts the  business  of  paying  negotiable  paper  of  cer- 
tain kinds  after  the  hour  when  ordinary  deposits 
are  received  and  checks  cashed.  Thus,  as  has  been 
said,  in  Chicago  it  appeared  to  be  the  custom  for 
banks  to  remain  open  between  three  and  six  o'clock 
P.  M.  for  the  purpose  of  meeting  certain  demands. 
A  presentment  of  negotiable  paper  which  was  a 
demand  of  this  sort  was  held  seasonable  when  made 
between  these  hours. 

234.  SECTION  76.—  [PRESENTMENT 
WHERE  PRINCIPAL  DEBTOR  IS  DEAD.] 
Where  a  person  primarily  liable  on  the  instrument 
is  dead,  and  no  place  of  payment  is  specified,  pre- 
sentment for  payment  must  be  made  to  his  per- 
sonal representative  if  such  there  be,  and  if,  with 
the  exercise  of  reasonable  diligence,  he  can  be 
be  found. 


146        NEGOTIABLE  INSTRUMENTS 

235.  COMMENT  ON  SECTION  76.— It  is  im- 
portant to  be  sure  that  the  person  primarily  liable  is 
dead.  Reasonable  cause  to  believe  him  dead  is  not 
enough ;  and  in  an  action  against  a  party  second- 
arily liable,  death  must  be  proved.  Moreover, 
though  death  excuses  presentment,  it  does  not  ex- 
cuse the  requisite  notice  of  dishonor  to  parties  sec- 
ondarily liable. 

236.  SECTION  77.— [PRESENTMENT  TO 
PERSONS  LIABLE  AS  PARTNERS.]  Where 
the  persons  primarily  liable  on  the  instrument  are 
liable  as  partners,  and  no  place  of  payment  is  speci- 
fied, presentment  for  payment  may  be  made  to  any 
one  of  them,  even  though  there  has  been  a  dissolu- 
tion of  the  firm. 

237.  LIABILITY  OF  PARTNERS  AND 
OTHER  OBLIGORS.— Partners  are  jointly  liable 
in  most  jurisdictions,  (in  a  few  they  are  liable  joint- 
ly and  severally)  but  there  is  this  difference  between 
joint  obligors  who  are  partners,  and  other  joint 
obligors.  Each  partner  is  agent  for  the  firm  in  all 
matters  appropriate  for  the  transaction  of  the  firm's 
business.  This  includes  the  payment  of  negotiable 
paper ;  therefore  presentment  to  one  is  in  effect  pre- 
sentment to  all. 

238.  SECTION  78.— [PRESENTMENT  TO 
JOINT  DEBTORS.]  Where  there  are  several 
persons,  not  partners,  primarily  liable  on  the  instru- 
ment, and  no  place  of  payment  is  specified,  present- 
ment must  be  made  to  them  all. 

239.  COMMENT  ON  SECTION  78.— Though 


NEGOTIABLE  INSTRUMENTS        147 

this  section  is  headed  in  the  Statute — "Presentment 
to  joint  debtors,"  the  heading  is  too  narrow,  for  the 
section  is  appUcable  not  simply  to  cases  of  joint 
liability,  but  to  cases  of  persons  severally  liable  or 
jointly  and  severally  liable.  If  the  parties  primarily 
liable  are  liable  severally,  or  jointly  and  severally, 
each  one  may  be  sued  separately;  whereas  if  they 
are  jointly  liable,  all  must  be  sued  jointly.  But  so 
far  as  charging  parties  secondarily  liable  is  con- 
cerned, the  situation  is  the  same  in  all  these  cases. 
The  indorser  or  drawer  ought  not  to  be  held  liable 
until  it  has  been  made  manifest  by  due  presentment 
that  no  one  of  the  parties  primarily  liable  will  pay 
the  instrument ;  and  this  can  only  be  ascertained  by 
presentment  to  all  of  them.  A  case  may  be  sup- 
posed where  strict  presentment  is  not  possible  on 
the  day  of  maturity  to  each  of  the  parties  primarily 
liable ;  they  may  live  at  places  distant  from  one  an- 
other, and  the  instrument  may  not  be  payable  at  a 
particular  place,  but  the  provisions  of  Section  81, 
would  excuse  necessary  delay. 

240.  SECTION  79.— [WHEN  PRESENT- 
MENT NOT  REQUIRED  TO  CHARGE  THE 
DRAWER.]  Presentment  for  payment  is  not  re- 
quired in  order  to  charge  the  drawer  where  he  has 
no  right  to  expect  or  require  that  the  drawee  or 
acceptor  will  pay  the  instrument. 

241.  EXCUSES  FOR  NON-PRESENT- 
MENT.— In  certain  cases  non-presentment  is  ex- 
cused. Sometimes  it  is  excused  altogether,  as  is 
provided  in  Sections  79,  80  and  82,  and  sometimes 


148        NEGOTIABLE  INSTRUMENTS 

it  is  excused  merely  temporarily,  as  provided  in 
Sections  81  and  147.  It  is  excused  altogether,  the 
statute  provides,  wherever  the  party  secondarily 
liable,  who  might  complain  of  non-presentment, 
had  no  reason  to  expect  that  the  instrument  would 
be  paid  if  presented.  The  common  illustration  of 
such  a  case  is  that  of  a  drawer  who  has  no  funds  or 
agreement  for  credit  with  the  drawee.  Such  a 
drawer  is  liable  without  presentment  to  the  drawee. 
Even  though  the  holder  was  ignorant  of  the  facts 
and  supposed  the  drawee  was  bound  to  pay,  failure 
to  present  being  due  simply  to  negligence,  the  result 
is  the  same. 

242.  SECTION  80.— [WHEN  PRESENT- 
MENT NOT  REQUIRED  TO  CHARGE  THE 
INDORSER.]  Presentment  for  payments  is  not 
required  in  order  to  charge  an  indorser  where  the 
instrument  was  made  or  accepted  for  his  accommo- 
dation and  he  has  no  reason  to  expect  that  the  in- 
strument will  be  paid  if  presented. 

243.  ACCOMMODATION  PAPER.  — The 
principle  of  the  last  section  finds  particular  applica- 
tion also  in  case  the  instrument  was  made  for  the 
accommodation  of  the  party  secondarily  liable,  and 
therefore  he  himself  ought  to  pay  it,  for  it  is  the  un- 
derstanding, where  paper  is  made  for  the  accom- 
modation of  one  who  is  secondarily  liable  on  the  in- 
strument, that  he  shall  save  harmless  the  party  who 
became  primarily  liable  on  the  instrument,  as  mat- 
ter of  accommodation,  and  shall  himself  pay  the 
instrument  at  maturity.    Such  a  person  secondarily 


NEGOTIABLE  INSTRUMENTS        149 

liable  on  the  instrument,  whether  he  is  a  drawer 
(Section  79)  or  an  indorser  (Section  80)  has  no 
right  to  complain  if  the  instrument  is  not  presented 
to  the  party  who  is  primarily  liable. 

244.  SECTION  81.— [WHEN  DELAY  IN 
MAKING  PRESENTMENT  IS  EXCUSED.] 
Delay  in  making  presentment  for  payment  is  ex- 
cused when  the  delay  is  caused  by  circumstances 
beyond  the  control  of  the  holder,  and  not  imputable 
to  his  default,  misconduct  or  negligence.  When 
the  cause  of  delay  ceases  to  operate,  presentment 
must  be  made  with  reasonable  deligence. 

245.  TEMPORARY  EXCUSES  FOR  PRE- 
SENTMENT.— Presentment  may  be  excused  tem- 
porarily. This  will  be  true  whenever  circumstances 
occur  without  the  fault  of  the  holder  which  make 
presentment  at  maturity  impossible  but  do  not  make 
it  permanently  impossible.  (Sections  81,  147.)  A 
common  illustration  of  this  would  be  where  the 
maker  of  a  note  died  and  no  executor  or  adminis- 
trator had  been  appointed.  That  would  excuse  de- 
lay in  presentment  until  the  appointment  of  such 
an  official,  but  when  the  cause  of  the  delay  ceased 
to  operate,  presentment  would  have  to  be  made 
with  reasonable  diligence. 

246.  SECTION  82.— [WHEN  PRESENT- 
MENT MAY  BE  DISPENSED  WITH.]  Present- 
ment for  payment  is  dispensed  with:  (1)  Where 
after  the  exercise  of  reasonable  diligence  present- 
ment as  required  by  this  act  cannot  be  made.  (2) 
Where  the  drawee  is  a  fictitious  person.  (3)  By 
waiver  of  presentment,  express  or  implied. 


150        NEGOTIABLE  INSTRUMENTS 

247.  INABILITY  TO  FIND  PERSON  PRI- 
MARILY LIABLE. — Presentment  for  payment  is 
also  excused  where,  after  reasonable  diligence,  the 
presentment  cannot  be  made,  as,  for  instance,  if  it 
is  impossible,  with  reasonable  diligence,  to  find  the 
person  primarily  liable  in  order  to  make  present- 
ment to  him.  Again,  where  the  party  primarily 
liable  is  a  fictitious  person,  it  is  obvious  there  can  be 
no  presentment.   (Section  82.) 

248.  WAIVER  OF  PRESENTMENT.— An- 
other case  and  an  important  one  is  where  present- 
ment is  waived.  The  waiver  may  be  expressed  or 
implied.  (Section  82.)  Sometimes  it  is  made  at 
the  time  when  the  obligation  of  the  drawer  or  in- 
dorser  is  undertaken.  If  waiver  is  made  at  this 
time,  the  consideration  which  supports  this  party's 
obligation  also  supports  the  agreement  to  waive 
presentment.  Waiver  of  presentment  may  also  be 
made  after  the  drawer  or  indorser  has  signed,  but 
prior  to  the  day  of  maturity.  In  such  a  case  the 
holder  is  justified  in  relying  on  the  waiver  and  re- 
fraining from  making  presentment.  There  is  what 
is  called  in  the  law  a  kind  of  estoppel  in  that  case, 
since  the  holder's  failure  to  make  the  presentment 
has  been  due  to  his  reliance  on  the  waiver.  But  the 
law  has  gone  even  farther  than  this.  Suppose  the 
instrument  has  actually  passed  maturity  and  no 
presentment  has  been  made,  and  therefore  the  party 
secondarily  liable  has  been  wholly  discharged. 
Even  then  a  waiver  of  presentment  may  be  effec- 


NEGOTIABLE  INSTRUMENTS         151 

tively  made  by  him.  In  this  case  it  is  a  waiver  of  a 
past  default.  That  is  an  exceptional  sort  of  case, 
for  generally  an  agreement  to  give  up  a  right  re- 
quires consideration  in  order  to  make  it  valid,  but 
here  the  party  secondarily  liable  gives  up  his  right 
to  rely  on  the  lack  of  presentment  as  a  ground  of 
discharge  without  any  consideration.  In  order, 
however,  to  have  a  waiver  of  this  last  sort  effective, 
the  party  who  waives  presentment  must  do  so  with 
knowledge  of  the  facts;  that  is,  he  must  know  that 
the  time  for  presentment  has  elapsed,  and  that  there 
has  been  a  failure  to  make  due  presentment.  But 
it  is  not  necessary  for  the  validity  of  such  a  -vwaiver 
that  the  party  making  it  should  know  his  legal 
rights;  that  is,  it  is  not  necessary  that  he  should 
know  that  the  lack  of  presentment  had  discharged 
him.  It  is  only  necessary  that  he  should  know  the 
facts  from  which  a  lawyer  would  know  that  he  had 
been  discharged. 

249.  OTHER  ILLUSTRATIONS  OF  EX- 
CUSES FOR  PRESENTMENT.— We  will  give 
one  or  two  other  illustrations  of  cases  where  it  was 
claimed  that  presentment  had  been  excused.  In 
one  case  the  president  of  a  corporation  indorsed  the 
note  of  the  corporation  and  before  the  maturity  the 
maker  was  adjudged  a  bankrupt,  one  of  the  acts  of 
bankruptcy  of  the  bankrupt  maker  being  the  writ- 
ten admisssion  of  the  indorser,  the  president  of  the 
corporation,  that  the  corporation  was  unable  to  pay 
its  debts  and  was  willing  to  be  declared  a  bankrupt. 


152        NEGOTIABLE  INSTRUMENTS 

It  was  held  on  these  facts  that  it  was  not  necessary 
to  present  the  note  to  the  corporation — the  maker 
— in  order  to  charge  the  indorser.  He  had  no  rea- 
son to  expect  that  the  note  would  be  paid;  indeed, 
he  had  every  reason  to  know  that  it  would  not  be. 
In  another  case  the  indorsers  of  a  note  had  assured 
the  holder  that  it  could  not  be  paid  at  maturity,  and 
they  knew  that  the  maker,  again  a  corporation,  had 
not  the  money  to  pay.  It  was  held  these  indorsers 
were  not  discharged  by  the  failure  to  present  at 
maturity.  They  had  virtually  represented  to  the 
holder  that  there  was  no  use  in  making  present- 
ment, and  after  they  had  taken  that  stand  they  could 
not  complain  that  the  holder  relied  upon  it.  Again, 
a  firm  made  a  note  and  one  of  the  partners  indorsed 
it.  Shortly  before  maturity  the  indorser,  in  speak- 
ing to  the  holder  regarding  a  general  assignment 
for  the  benefit  of  creditors  which  the  firm  was  con- 
templating, told  the  holder  that  neither  the  firm  nor 
he  could  pay  the  note  at  maturity,  and  no  present- 
ment was  made,  and  here  again  it  was  held  that 
there  was  a  waiver.  A  still  stronger  case  is  where 
the  indorser  assured  the  holder  before  maturity  that 
he,  the  indorser,  would  be  responsible  for  principal 
and  interest  when  it  was  due  and  would  look  after 
the  collection.  In  short,  any  statement  before  ma- 
turity made  by  a  party  secondarily  liable,  the  na- 
tural effect  of  which  would  be  to  induce  the  holder 
to  refrain  from  making  presentment  to  the  party 
primarily  liable,  either  because  it  was  of  no  use  to 


NEGOTIABLE  INSTRUMENTS        153 

do  so  Dr  because  it  was  unnecessary  to  do  so,  since 
the  party  secondarily  liable  was  going  to  pay  it  any 
way,  will  excuse  presentment. 

250.  DISTINCT  AGREEMENT  NECES- 
SARY FOR  WAIVER  AFTER  MATURITY.— 
But  when  it  comes  to  a  waiver  after  maturity,  then 
you  must  have  either  a  distinct  promise  to  pay  the 
note  or  a  distinct  agreement  to  waive  it.  The  differ- 
ence between  the  situation  after  maturity  and  be- 
fore is,  that  after  maturity  the  holder  has  already 
lost  his  rights  by  failing  to  make  presentment  at 
maturity,  and  in  order  to  revive  them  a  clear  inten- 
tion to  pay  is  necessary. 

251.  SECTION  83.  [WHEN  INSTRUMENT 
DISHONORED  BY  NON-PAYMENT.]  The  in- 
strument is  dishonored  by  non-payment  when — (1) 
It  is  duly  presented  for  payment  and  payment  is 
refused  or  cannot  be  obtained;  or  (2)  Presentment 
is  excused  and  the  instrument  is  overdue  and  un- 
paid. 

252.  COMMENT  ON  SECTION  83.— Dishonor 
is  important  as  one  of  the  steps  essential  in  order  to 
charge  parties  secondarily  liable.  It  is  not  import- 
ant otherwise,  for  as  we  have  seen  so  far  as  parties 
primarily  liable  are  concerned,  a  right  of  action 
accrues  to  the  holder  though  the  instrument  has  not 
been  dishonored  on  presentment. 

253.  SECTION  84.— [LIABILITY  OF  PER- 
SON SECONDARILY  LIABLE,  WHEN  IN- 
STRUMENT DISHONORED.]  Subject  to  the 
provisions  of  this  act,  when  the  instrument  is  dis- 


154        NEGOTIABLE  INSTRUMENTS 

honored  by  non-payment,  an  immediate  right  of 
recourse  to  all  parties  secondarily  liable  thereon 
accrues  to  the  holder. 

254.  COMMENT  ON  SECTION  84.— The 
words  "subject  to  the  provisions  of  this  Act"  in  this 

i  section,  refer  to  the  necessity  of  notice  of  the  dis- 
honor. As  will  be  seen,  parties  secondarily  liable 
can  not  usually  be  held  unless  prompt  notice  is 
given  of  the  dishonor. 

255.  SECTION  85.— [TIME  OF  MATUR- 
ITY.] Every  negotiable  instrument  is  payable  at 
the  time  fixed  therein  without  grace.  When  the 
day  of  maturity  falls  upon  Sunday,  or  a  holiday,  the 
instrument  is  payable  on  the  next  succeeding  busi- 
ness day.  Instruments  falling  due  [or  becoming 
payable]  on  Saturday  are  to  be  presented  for  pay- 
ment on  the  next  succeeding  business  day,  except 
that  instruments  payable  on  demand  may,  at  the 
option  of  the  holder,  be  presented  for  payment  be- 
fore twelve  o'clock  noon  on  Saturday  when  that  en- 
tire day  is  not  a  holiday. 

.NOTE. — The  words  in  brackets  [or  becoming  payable] 
have  been  inserted  for  the  sake  of  clearness.  They  are 
found  in  the  Kansas,  Massachusetts,  Minnesota,  Missouri, 
New  Hampshire,  New  York  and  Virginia  Acts.  This  sec- 
tion having  twice  used  the  word  "payable"  then  uses  the 
words  "falling  due."  This  has  raised  doubts  in  the  minds 
of  some  where  Friday  is  a  legal  holiday  and  paper  matures 
on  Friday.  These  words  are  inserted  to  remove  any  pos- 
sible doubt.  Sight  drafts  are  excepted  from  the  abolition 
of  days  of  grace  in  Massachusetts,  North  Carolina  and  New 
Hampshire.  The  provision  of  the  section  in  regard  to  Sat- 
urday is  omitted  in  Arizona,  Kentucky,  Vermont  and  Wis- 
consin. 

256.  GRACE  AND  HOLIDAYS.— There  are 


NEGOTIABLE  INSTRUMENTS        155 

no  days  of  grace  now  in  States  where  the  Negotiable 
Instruments  Law  is  in  force  (except  on  sight  drafts, 
payable  in  Massachusetts,  New  Hampshire  or 
North  Carolina).  Sundays  and  holidays  are  in- 
cluded in  the  count  as  intermediate  days,  that  is,  it 
does  not  make  any  difference  how  many  Sundays 
and  holidays  there  may  be  within  the  thirty  days, 
but  if  the  thirtieth  day  falls  upon  a  holiday  then  the 
instrument  is  payable  the  next  succeeding  business 
day.  The  rule  is  otherwise  where  days  of  grace  are 
concerned.  If  the  last  day  of  grace  falls  on  a  holi- 
day, the  instrument  is  due  on  the  next  preceding 
business  day,  for  days  of  grace  are  never  extended 
beyond  three  days.  This  principle  is  still  important 
where  the  Negotiable  Instruments  Law  is  not  in 
force,  and  also  in  regard  to  sight-drafts  in  the  three 
States  above  mentioned. 

257.  SECTION  86.— [TIME;  HOW  COM- 
PUTED.] Where  the  instrument  is  payable  at  a 
fixed  period  after  date,  after  sight,  or  after  the  hap- 
pening of  a  specified  event,  the  time  of  payment  is 
determined  by  excluding  the  day  from  which  the 
time  is  to  begin  to  run,  and  by  including  the  date  of 
payment. 

258.  COMMENT  ON  SECTION  86.— In  con- 
sidering when  an  instrument  has  matured  we  must 
consider  separately  instruments  payable  on  time 
and  instruments  payable  on  demand.  In  calculat- 
ing the  period  for  the  latter  the  statute  provides 
that  the  first  day  shall  be  excluded  and  the  day  of 


156        NEGOTIABLE  INSTRUMENTS 

payment  included.  For  instance,  on  a  note  dated 
the  2d  of  January,  payable  in  thirty  days,  you  do 
not  count  the  2d  of  January  in  figuring  the  time, 
but  you  do  count  thirty  days  beginning  with  Janu- 
ary 3,  and  the  thirtieth  day  will  be  the  day  of  pay- 
ment. It  would,  of  course,  make  no  difference  if 
you  included  the  2d  of  January  and  excluded  the 
day  of  maturity.  The  important  thing  is  that  you 
must  not  include  both  or  exclude  both. 

259.  SECTION  87.— [RULE  WHERE  IN- 
STRUMENT PAYABLE  AT  BANK.]  Where 
the  instrument  is  made  payable  at  a  bank  it  is  equi- 
valent to  an  order  to  the  bank  to  pay  the  same  for 
the  account  of  the  principal  debtor  thereon. 

NOTE. — This  section  is  omitted  in  Illinois,  Nebraska 
and  South  Dakota,  and  has  been  repealed  in  Kansas.  In  Min- 
nesota the  section  is  retained  but  instead  of  the  words  "it  is 
equivalent"  are  substituted  "it  shall  not  be  equivalent." 

260.  DOMICILED  NOTES.— It  was  a  disputed 
question  in  the  common  law  whether  making  a  note 
payable  at  a  bank  was  equivalent  to  an  order  on  the 
bank  to  pay.  The  better  view  was  in  accordance 
with  the  present  provision  of  the  statute  that  this 
did  amount  to  an  order,  and  therefore  made  such  a 
note  (which  was  sometimes  called  a  domiciled  note) 
in  effect  a  bill  of  exchange  drawn  on  the  bank.  The 
coupons  on  bonds  are  frequently  made  payable  in 
this  way.  In  some  jurisdictions,  however,  there  has 
been  hostility  to  this  principle,  and  sometimes  it  was 
argued  that  making  an  instrument  payable  at  a 
bank  only  gave  authority  to  the  bank  to  make  pay- 


NEGOTIABLE  INSTRUMENTS        157 

ment,  but  did  not  order  it  so  to  do.  Others  argued 
that  there  was  neither  order  nor  authority.  The 
omission  of  this  section  of  the  statute  in  a  few 
States,  leaves  the  matter  in  somewhat  dubious  con- 
dition in  those  States.  By  Section  196  of  the  Nego- 
tiable Instruments  Law,  in  the  absence  of  an  ex- 
press provision  on  any  point,  the  rule  of  the  law 
merchant  applies,  and  as  it  is  somewhat  uncertain 
what  the  rule  of  the  law  merchant  on  this  matter  is, 
there  is  chance  for  litigation. 

261.  SECTION  88.— [WHAT  CONSTI- 
TUTES PAYMENT  IN  DUE  COURSE.]  Pay- 
ment is  made  in  due  course  when  it  is  made  at  or 
after  the  maturity  of  the  instrument  to  the  holder 
thereof  in  good  faith  and  without  notice  that  his 
title  is  defective. 

262.  PAYMENT  IN  DUE  COURSE.— We 
have  discussed  in  connection  with  personal  defences 
the  rights  of  holders  in  due  course,  that  is,  pur- 
chasers for  value  in  good  faith  before  maturity  and 
without  notice ;  but  a  bank  is  as  much  interested  in 
payment  of  instruments  in  due  course  as  it  is  in 
regard  to  purchases  of  them  in  due  course.  In  gen- 
eral, the  rules  as  to  what  is  payment  in  due  course 
are  the  same  as  the  rules  in  regard  to  what  is  pur- 
chase in  due  course.  In  other  words,  one  who  pays 
under  the  same  circumstances  in  regard  to  notice 
and  value  and  good  faith  as  a  purchaser  who  pur- 
chases in  good  faith  for  value  and  without  notice, 
will  be  protected  in  the  same  way.     But  in   one 


158        NEGOTIABLE  INSTRUMENTS 

respect  a  person  who  pays  in  due  course  stands  in 
a  better  position  than  one  who  purchases  in  due 
course ;  or,  rather,  payment  in  due  course  is  a  little 
wider  in  one  respect  than  purchase  in  due  course. 
One  is  not  a  purchaser  in  due  course  who  buys  after 
(maturity,  but  one  who  pays  after  maturity  an  in- 
strument on  which  he  is  liable  is  as  much  protected 
as  if  he  paid  at  the  instant  of  maturity,  and  the  rea- 
son for  the  distinction  is  plain.  Nobody  needs  to 
buy  paper  after  maturity  unless  he  likes,  but  the 
maker  of  a  note,  from  whom  payment  is  demanded 
a  year  after  maturity,  is  just  as  much  bound  to  pay 
that  note  as  if  payment  had  been  demanded 
promptly.  It  is  therefore  paying  in  due  course  to 
pay  when  payment  is  demanded,  even  if  that  be  long 
after  maturity.  A  bank  will  accordingly  pay  a 
check  even  though  it  is  not  presented  within  a  reas- 
onable time.  Whether  there  is  any  limit  to  this 
principle  may  perhaps  be  a  question.  Perhaps  a 
bank  would  not  without  inquiry  pay  a  check  that 
was  issued  several  years  previously;  certainly  not 
unless  it  felt  pretty  well  satisfied  that  everything 
was  all  irght.  But  so  far  as  the  statute  (Section  88) 
and  the  decisions  go,  no  limit  seems  to  have  been 
set  to  the  right  of  the  parties  liable  on  an  instru- 
ment to  pay  after  maturity,  and  a  long  time  after. 
The  position  of  a  bank  or  a  drawee  who  has  not 
accepted  the  instrument  is  of  course  a  little  different 
from  the  position  of  one  who  has  actually  made 
himself  liable  on  the  instrument, — as  the  maker  of  a 


NEGOTIABLE  INSTRUMENTS        159 

note  or  the  acceptor  of  a  bill,  or  a  certifying  bank 
which  has  certified  a  check.  As  to  such  a  person 
there  seems  to  be  no  period  short  of  the  Statute  of 
Limitations  in  which  payment  may  not  be  de- 
manded rightfully,  and  therefore  no  time  beyond 
which  the  party  liable  may  not  properly  pay. 

Article  VII— Notice  of  Dishonor 

263.  SECTION  89.— [TO  WHOM  NOTICE 
OF  DISHONOR  MUST  BE  GIVEN.]  Except  as 
herein  otherwise  provided,  when  a  negotiable  in- 
strument has  been  dishonored  by  non-acceptance  or 
non-payment,  notice  of  dishonor  must  be  given  to 
the  drawer  and  to  each  indorser,  and  any  drawer  or 
indorser  to  whom  such  notice  is  not  given  is  dis- 
charged. 

264.  NOTICE  OF  NON-PAYMENT  NECES- 
SARY TO  CHARGE  SECONDARY  PARTIES. 
— After  presentment  has  been  duly  made,  if  the 
party  primarily  liable  pays,  of  course  the  parties 
secondarily  liable  are  excused.  If  the  party  primar- 
ily liable  does  not  pay,  then  it  is  further  necessary 
that  the  parties  secondarily  liable  shall  be  notified, 
or  at  least  that  proper  diligence  shall  be  exercised  in 
order  to  charge  them.  (Section  89.)  This  principle 
applies  to  all  parties  secondarily  liable,  even  to  the 
drawer  of  a  check.  By  Section  186  the  drawer  of  a 
check  is  not  discharged  by  failure  to  present 
promptly,  except  to  the  extent  that  this  delay  actu- 
ally works  an  injury ;  but  presumably  by  a  mistake 


160        NEGOTIABLE  INSTRUMENTS 

on  the  part  of  the  draughtsman  of  the  act,  no  special 
provision  is  made  as  to  failure  to  give  notice  of  dis- 
honor of  a  check,  and,  therefore,  by  virtue  of  the 
general  provision  in  Section  89  such  failure  dis- 
charges the  drawer  absolutely,  whether  he  is  in- 
jured or  not.  All  indorsers,  either  on  checks,  ordi- 
nary bills  of  exchange  or  notes,  must  be  notified.  A 
joint  maker  need  not  be  notified,  even  though  he  is 
a  surety  and  that  fact  is  stated  in  the  note  or  known 
to  the  holder. 

265.  EXCUSE  FOR  PRESENTMENT  DOES 
NOT  EXCUSE  NOTICE.— An  excuse  for  making 
presentment  does  not  excuse  the  failure  to  give 
notice.  A  waiver  of  presentment  is  construed  as  in- 
cluding a  waiver  of  notice,  but  a  mere  excuse  for 
not  presenting  does  not  excuse  the  notice.  Indeed, 
frequently  when  presentment  is  excused  the  occa- 
sion is  such  that  the  indorser  may  particularly  want 
notice.  Thus  if  presentment  cannot  be  made  be- 
cause the  party  primarily  liable  cannot  be  found, 
then  the  indorser  ought  to  be  notified  of  that  so  that 
he  may,  if  he  wishes,  endeavor  to  find  the  missing 
party. 

266.  SECTION  90.— [BY  WHOM  GIVEN.] 
The  notice  may  be  given  by  or  on  behalf  of  the 
holder,  or  by  or  on  behalf  of  any  party  to  the  instru- 
ment who  might  be  compelled  to  pay  it  to  the 
holder,  and  who  upon  taking  it  up  would  have  a 
right  of  reimbursement  from  the  party  to  whom  the 
notice  is  given. 


NEGOTIABLE  INSTRUMENTS        161 

267.  BY  WHOM  NOTICE  SHOULD  BE 
GIVEN. — Notice  may,  of  course,  be  given  by  the 
holder.  But  it  may  also  be  given  by  any  one  who 
acts  on  behalf  of  the  holder.  Even  though  he  is  not 
at  the  time  an  authorized  agent  of  the  holder,  the 
latter  may  ratify  subsequently  the  assumption  of 
agency.  Not  only  may  the  notice  be  given  by  or  on 
behalf  of  the  holder,  but  by  or  on  behalf  of  any 
party  to  the  instrument  who  might  be  compelled  to 
pay  the  holder,  and  who  upon  taking  it  up  would 
have  a  right  to  reimbursement  from  the  party  to 
whom  the  notice  is  given.  Let  us  give  an  illustra- 
tion. Suppose  a  note  made  by  A  and  indorsed  by 
B,  C  and  D,  respectively, — first,  second  and  third 
indorsers.  D,  if  compelled  to  pay,  will  have  a  right 
of  recourse  against  C  and  B.  It  is  therefore  import- 
ant for  D  that  B  and  C  should  receive  due  notice. 
Accordingly,  D  may  notify  B  and  C,  and  the  notice 
that  D  thus  gives  will  be  as  effective  as  if  it  were 
given  by  the  holder.  Similarly,  C  might  notify  B, 
but  C  could  not  effectively  notify  D,  because  even 
if  C  is  compelled  to  take  up  the  paper  he  will  have 
no  right  of  reimbursement  from  D,  and  therefore  it 
.is  nothing  to  him  whether  D  is  charged  or  not.  B 
cannot  effectively  give  notice  to  anybody  for  the 
same  reason,  for  if  he  is  compelled  to  pay,  there  is 
no  party  who  is  secondarily  liable  against  whom  he 
would  have  any  recourse. 

268.  SECTION  91.~-[NOTICE  GIVEN  BY 
AGENT.]    Notice  of  dishonor  may  be  given  by  an 


162        NEGOTIABLE  INSTRUMENTS 

agent  either  in  his  own  name  or  in  the  name  of  any 
party  entitled  to  give  notice,  whether  that  party  be 
his  principal  or  not. 

269.  COMMENT  ON  SECTION  91.— This 
section  extends  the  ordinary  principles  of  agency, 
since  it  allows  notice  to  be  given  in  the  name  of  a 
party  entitled  to  give  notice  though  that  party  is 
not  in  fact  the  principal  of  the  agent.  A  notice 
given  by  a  notary  in  the  name  of  the  maker  (who 
because  he  is  the  party  primarily  liable  was  not  en- 
titled to  give  notice)  has,  however,  been  held  insuf- 
ficient. 

270.  SECTION  92.— [EFFECT  OF  NOTICE 
GIVEN  ON  BEHALF  OF  HOLDER.]  Where 
notice  is  given  by  or  on  behalf  of  the  holder,  it 
enures  for  the  benefit  of  all  subsequent  holders  and 
all  prior  parties  who  have  a  right  of  recourse 
against  the  party  to  whom  it  is  given. 

271.  COMMENT  ON  SECTION  92.— When  a 
party  secondarily  liable  is  once  charged  by  notice 
from  the  holder,  any  one  who  succeeds  to  the  title 
of  the  holder  succeeds  to  the  benefit  of  the  notice, 
and  it  makes  no  difference  whether  the  subsequent 
holder  succeeds  to  the  title  by  purchase  or  because 
he  is  a  prior  party  on  the  instrument  and  has  been 
forced  to  take  up  the  instrument.  The  holder,  how- 
ever, is  not  bound  to  charge  any  party  whom  he 
does  not  wish  to.  He  may  be  satisfied  to  charge  his 
immediate  indorser  feeling  sure  he  can  get  payment 
from  him.  This  indorser  if  he  wishes  recourse  over 
against  prior  parties  whom  the  holder  has  not 


NEGOTIABLE  INSTRUMENTS        163 

charged,  must  assume  the  burden  of  giving  them 
proper  notice.  It  is,  obviously  never  safe  to  assume 
that  a  holder  has  charged  all  prior  parties,  so  that 
any  party  secondarily  liable  when  charged  himself 
should  promptly  give  notice  to  prior  secondary  par- 
ties. 

272.  SECTION  93.— [EFFECT  WHERE  NO- 
TICE IS  GIVEN  BY  PARTY  ENTITLED 
THERETO.]  Where  notice  is  given  by  or  on  be- 
half of  a  party  entitled  to  give  notice,  it  enures  for 
the  benefit  of  the  holder  and  all  parties  subsequent 
to  the  party  to  whom  notice  is  given. 

273.  ILLUSTRATION  OF  SECTION  93.— As 
not  only  the  holder  but  other  persons,  as  we  have 
seen,  are  entitled  to  give  notice,  the  same  principle 
is  applicable  to  other  persons  as  is  laid  down  in  the 
preceding  section  as  applicable  to  the  holder.  That 
is,  for  instance,  if  notice  is  given  to  the  drawer  of  a 
bill  of  exchange  by  the  first  indorser,  the  holder  can 
rely  on  that  notice,  as  can  all  parties  subsequent  to 
the  drawer. 

274.  SECTION  94.— [WHEN  AGENT  MAY 
GIVE  NOTICE.]  Where  the  instrument  has  been 
dishonored  in  the  hands  of  an  agent,  he  may  either 
himself  give  notice  to  the  parties  liable  thereon,  or 
he  may  give  notice  to  his  principal.  If  he  gives  no- 
tice to  his  principal,  he  must  do  so  within  the  same 
time  as  if  he  were  the  holder,  and  the  principal  upon 
the  receipt  of  such  notice  himself  the  same  time  for 
giving  notice  as  if  the  agent  had  been  an  indepen- 
dent holder. 


164        NEGOTIABLE  INSTRUMENTS 

275.  ILLUSTRATION  OF  SECTION  94.— 
This  provision  is  of  some  importance  to  banks  for 
banks  are  often  agents  for  collection.  Thus,  where 
the  instrument  has  been  dishonored  when  in  the 
hands  of  an  agent  for  collection,  that  agent  may 
either  give  notice  to  the  party  liable  on  the  instru- 
ment or  he  may  give  notice  to  his  own  principal,  and 
if  he  gives  such  a  notice  to  his  principal  within  the 
period  that  is  necessary  as  between  holder  and  in- 
dorser,  the  principal  will  have  the  same  time  in  ad- 
dition for  giving  notice  to  the  drawer  and  in- 
dorsers. 

276.  SECTION  95.— [WHEN  NOTICE  SUF- 
FICIENT.] A  written  notice  need  not  be  signed, 
and  an  insufficient  written  notice  may  be  supple- 
mented and  validated  by  verbal  communication.  A 
misdescription  of  the  instrument  does  not  vitiate 
the  notice  unless  the  party  to  whom  the  notice  is 
given  is  in  fact  misled  thereby. 

NOTE. — Under  the  Kentucky  Act,  the  notice  must  be 
written  and  signed. 

277.  FORM  OF  NOTICE.— What  sort  of  thing 
is  a  notice?  In  the  first  place,  the  notice  may  be 
oral  as  well  as  written,  or  partly  oral  and  partly 
written.  If  written,  it  need  not  be  signed,  but  a 
holder  should  always  give  notice  in  writing  and 
sign  it.  He  would  be  foolish,  also,  not  to  keep  a 
copy  of  the  writing.  This  is  not  because  these 
things  are  legally  necessary,  but  to  have  ready 
means  of  proof.  The  notice  should  properly  con- 
tain a  sufficient  description  to  identify  the  instru- 


NEGOTIABLE  INSTRUMENTS        165 

ment,  and  should  state  that  it  has  been  dishonored 
either  by  non-acceptance  or  non-payment.  A  mis- 
take in  the  description  of  the  instrument,  however, 
does  not  invalidate  the  notice,  if  the  party  secon- 
darily liable  is  not  in  fact  misled,  as  he  would  not  be 
if  there  was  no  other  note  on  which  he  was  bound. 
It  is  well  enough  to  state  in  the  notice  that  the 
party  secondarily  liable  is  looked  to  for  payment, 
but  that  is  not  necessary  because  it  is  implied  from 
the  mere  circumstances  of  giving  notice. 

278.  SECTION  96.--[FORM  OF  NOTICE.] 
The  notice  may  be  in  writing  or  merely  oral  and 
may  be  given  in  any  terms  which  sufficiently  iden- 
tify the  instrument,  and  indicate  that  it  has  been 
dishonored  by  non-acceptance  or  non-payment.  It 
may  in  all  cases  be  given  by  delivering  it  personally 
or  through  the  mails. 

279.  KNOWLEDGE  IS  NOT  EQUIVALENT 
TO  NOTICE. — A  rather  hard  case  presents  these 
facts :  a  notice  of  dishonor  and  an  envelope  contain- 
ing it  were  addressed  to  the  second  indorser,  but 
they  were  delivered  to  the  first  indorser  who  read 
the  notice.  It  was  held,  nevertheless,  that  he  was 
not  charged.  The  case  brings  out  the  important* 
point  that  knowledge  on  the  part  of  one  secondarily 
liable  that  there  has  been  presentment  and  dishonor 
is  not  a  substitute  for  notice.  We  suppose  the  rea- 
son is  that  a  notification,  although  it  may  simply 
contain  a  statement  of  the  fact  that  the  instrument 
has  been  dishonored,  impliedly  contains  notice  that 
the  holder  looks  to  the  party  secondarily  liable  for 


166        NEGOTIABLE  INSTRUMENTS 

payment,  and  mere  knowledge  from  outside  sources 
that  the  instrument  has  been  dishonored  does  not 
necessarily  indicate  to  the  party  secondarily  liable 
that  the  holder  is  going  to  look  to  him  for  payment. 

280.  SECTION  97.— [TO  WHOM  NOTICE 
MAY  BE  GIVEN.]  Notice  of  dishonor  may  be 
given  either  to  the  party  himself  or  to  his  agent  in 
that  behalf. 

281.  TO  WHOM  NOTICE  MAY  BE  GIVEN. 
— Notice  may  be  given  either  to  the  party  secon- 
darily liable  himself  or  to  his  agent  in  that  behalf, 
but  here  you  must  have  a  real  agency,  the  scope  of 
which  includes  receiving  such  notice,  because  there 
will  never  be  any  ratification  of  a  notice  given  to 
one  who  purports  to  be  the  agent  of  a  party  secon- 
darily liable  though  not  such  in  reality.  Persons 
secondarily  liable  will  always  be  too  glad  to  get  out 
of  liability  to  ratify.  The  question  of  what  is  a  suf- 
ficient agency  is  rather  an  important  one,  especially 
in  the  case  of  a  corporation.  In  a  recent  New  York 
case  a  notice  was  left  at  the  cash  window  of  a  hotel 
corporation,  which  was  a  party  secondarily  liable. 
It  was  held  that  that  notice  was  not  sufficient,  as  it 
did  not  in  fact  reach  the  hands  of  any  person  in 
authority.  In  a  case  of  this  sort  it  is  oftener  safer 
to  send  a  notice  by  mail  than  to  attempt  to  make  a 
personal  delivery,  for  in  case  of  a  notice  sent  by 
mail,  if  it  is  correctly  addressed,  the  responsibility 
of  safe  arrival  of  the  notice  is  on  the  person  to 
whom  it  is  addressed,  whereas  if  the  holder  at- 


NEGOTIABLE  INSTRUMENTS        167 

tempts  a  personal  delivery  he  must   at   his   peril 
make  a  delivery  to  the  right  person. 

282.  SECTION  98.— [NOTICE  WHERE 
PARTY  IS  DEAD.]  When  any  party  is  dead,  and 
his  death  is  known  to  the  party  giving  notice,  the 
notice  must  be  given  to  a  personal  representative, 
if  there  be  one,  and  if  with  reasonable  diligence  he 
can  be  found.  If  there  be  no  personal  representa- 
tive, notice  may  be  sent  to  the  last  residence  or  last 
place  of  business  of  the  deceased. 

283.  COMMENT  ON  SECTION  98.— This 
section  provides  a  rule  for  a  difficult  situation.  In 
many  of  these  doubtful  cases  a  cautious  person  will 
give  notice  in  more  than  one  way  in  order  to  make 
sure  that  he  has  done  everything  that  could  possi- 
bly be  required. 

284.  SECTION  99.— [NOTICE  TO  PART- 
NERS.] Where  the  parties  to  be  notified  are  part- 
ners, notice  to  any  one  partner  is  notice  to  the  firm 
even  though  there  has  been  a  dissolution. 

285.  COMMENT  ON  SECTION  99.— As  part- 
ners are  agents  for  each  other  in  the  firm  business, 
the  rule  stated  in  this  section  is  a  natural  one,  and 
the  same  rule  would  apply  to  other  joint  parties 
where  one  had  authority  to  receive  notice  for  the 
other,  even  though  the  parties  were  not  partners. 

286.  SECTION  100.— [NOTICE  TO  PER- 
SONS JOINTLY  LIABLE.]  Notice  to  joint 
parties  who  are  not  partners  must  be  given  to  each 
of  them,  unless  one  of  them  has  authority  to  receive 
such  notice  for  the  others. 

287.  COMMENT  ON  SECTION   100.— The 


168        NEGOTIABLE  INSTRUMENTS 

reason  why  each  party  must  receive  notice  is  simi- 
lar to  the  reason  which  requires  presentment  to 
each  of  several  persons  primarily  liable.  Each  has 
his  own  interest  to  protect  and  should  be  given  a 
chance  to  protect  it. 

288.  SECTION  101.— [NOTICE  TO  BANK- 
RUPT.] Where  a  party  has  been  adjudged  a 
bankrupt  or  an  insolvent,  or  has  made  an  assign- 
ment for  the  benefit  of  creditors,  notice  may  be 
given  either  to  the  party  himself  or  to  his  trustee  or 
assignee. 

289.  COMMENT  ON  SECTION  101.— Though 
the  statute  permits  notice  to  be  given  to  either  the 
insolvent,  or  to  his  trustee  or  assignee,  the  wise 
plan  is  to  give  notice  to  both. 

290.  SECTION  102.  —  [TIME  WITHIN 
WHICH  NOTICE  MUST  BE  GIVEN.]  Notice 
may  be  given  as  soon  as  the  instrument  is  dishon- 
ored, and  unless  delay  is  excused  as  hereinafter  pro- 
vided, must  be  given  within  the  times  fixed  by  this 
act. 

291.  COMMENT  ON  SECTION  102.— A  no- 
tice cannot  be  given  until  the  instrument  is  actually 
dishonored.  On  the  other  hand  it  may  be  given  on 
the  same  day  that  the  instrument  is  dishonored. 
An  ordinary  debt  may  be  paid  by  the  debtor  at  any 
hour  of  the  day  when  the  debt  falls  due.  The  fact 
that  the  debtor  has  not  paid  in  the  morning,  or  has 
even  refused  to  pay  in  the  morning,  does  not  put 
him  in  default.  He  may  pay  in  the  afternoon;  but 
a  party  primarily  liable  on  a  negotiable  instrument 


NEGOTIABLE  INSTRUMENTS        169 

is  bound  to  pay  on  presentment  at  any  time  during 
business  hours.  If  an  instrument  is  presented  to 
him  at  9  o'clock  it  is  dishonored,  although  he  says 
he  will  pay  it  at  10  o'clock.  As  we  have  seen  he 
cannot  himself  be  sued  until  the  next  day,  but  the 
parties  secondarily  liable  may  be  effectively  notified 
at  once  of  the  dishonor. 

292.  SECTION  103.— [WHERE  PARTIES 
RESIDE  IN  SAME  PLACE.]  Where  the  person 
giving  and  the  person  to  receive  notice  reside  in  the 
same  place,  notice  must  be  given  within  the  fol- 
lowing times — (1)  If  given  at  the  place  of  business 
of  the  person  to  receive  notice,  it  must  be  given 
before  the  close  of  business  hours  on  the  day  fol- 
lowing. (2)  If  given  at  his  residence,  it  must  be 
given  before  the  usual  hours  of  rest  on  the  day  fol- 
lowing. (3)  If  sent  by  mail,  it  must  be  deposited 
in  the  postoffice  in  time  to  reach  him  in  usual  course 
on  the  day  following. 

293.  ILLUSTRATION  OF  RESIDENCE.— 
The  statute  distinguishes  in  regard  to  notice  be- 
tween cases  where  the  person  to  be  notified  resides 
in  the  same  city  or  town  as  the  person  giving  the 
notice  and  cases  where  he  does  not.  If  both  reside 
in  the  same  city  or  town  notice,  if  given  personally, 
must  be  given  by  the  next  day  following,  at  a  reas- 
onable hour.  If  sent  by  mail  it  must  be  mailed  in 
time  to  reach  the  party  to  be  notified  in  the  normal 
course  of  business  on  the  next  day  following.  It 
makes  no  difference  that  it  does  not  reach  him,  all 
that  is  necessary  is  that  it  shall  be  mailed  so  that  it 


170        NEGOTIABLE  INSTRUMENTS 

normally  would.  If  given  at  the  place  of  business 
it  must  be  before  the  close  of  business  hours;  if 
made  at  the  residence  of  the  party  to  be  notified, 
any  time  before  the  usual  hour  of  retiring  is  suffi- 
cient, and  the  same  distinction  between  place  of 
business  and  place  of  residence  is  important  if  the 
notice  is  sent  by  mail.  Suppose  the  usual  hours  of 
business  close  at  5  o'clock,  then  a  notice  by  mail 
addressed  to  the  place  of  business  would  have  to  be 
mailed  so  as  normally  to  reach  the  party  before  that 
hour,  whereas  if  addressed  to  the  home  of  the  in- 
dorser  the  notice  would  be  mailed  in  time,  if  by  the 
normal  course  of  post,  it  would  reach  the  indorser's 
residence  by  6  or  7  o'clock. 

294.  EFFECT  OF  SUNDAYS  AND  HOLI- 
DAYS AND  SATURDAYS.— The  question  may 
be  raised  how  a  holiday  or  Saturday  affects  this 
question.  The  act  provides  broadly,  in  Section  194, 
that  anything  that  is  required  to  be  done  on  Sun- 
day or  a  holiday  may  be  done  on  the  next  succeed- 
ing business  day.  We  suppose,  therefore,  that  the 
period  for  giving  notice  is  extended  by  this  provi- 
sion so  far  as  holidays  and  Sundays  are  concerned, 
but  there  is  no  such  general  provision  as  to  Satur- 
day. There  is  a  provision  as  to  presentment  of 
notes  maturing  on  Saturday,  (Section  85),  but 
there  is  none  in  regard  to  notice  on  Saturday.  It 
would  seem,  therefore,  that  the  general  rule  as  to 
notice  on  any  ordinary  day  would  also  be  applicable 
to  Saturday,  except  that  a  notice   required   to   be 


NEGOTIABLE  INSTRUMENTS        171 

mailed  so  as  to  arrive,  in  normal  course  of  mail, 
during  business  hours  would  have  to  be  mailed 
earlier  if  it  were  expected  to  arrive  on  Saturday 
than  if  expected  to  arrive  on  another  day. 

295.  SECTION  104.— [WHERE  PARTIES 
RESIDE  IN  DIFFERENT  PLACES.]  Where  the 
person  giving  and  the  person  to  receive  notice  re- 
side in  different  places,  the  notice  must  be  given 
within  the  following  times: — (1)  If  sent  by  mail, 
it  must  be  deposited  in  the  postoffice  in  time  to  go 
by  mail  the  day  following  the  day  of  dishonor,  or 
if  there  be  no  mail  at  a  convenient  hour  on  that 
day,  by  the  next  mail  thereafter.  (2)  If  given  oth- 
erwise than  through  the  postoffice,  then  within  the 
time  that  notice  would  have  been  received  in  due 
course  of  mail,  if  it  had  been  deposited  in  the  post- 
office  within  the  time  specified  in  the  last  subdivi- 
sion. 

296.— ILLUSTRATION  OF  SECTION  104.— 
Where  the  party  notifying  and  the  party  to  be  noti- 
fied reside  in  different  places  the  notice  if  sent  by 
mail  must  be  deposited  in  time  to  go  on  the  day 
following  the  day  of  dishonor,  or  if  there  is  no  mail 
at  a  convenient  hour  on  that  day,  by  the  next  mail 
thereafter.  If  the  only  mail  left  a  place  at  6  A.  M. 
it  would  be  enough  to  mail  a  notice  in  time  to  go 
out  at  6  A.  M.  on  the  next  day  but  one  after  the 
day  of  dishonor.  But  it  has  been  held  in  Wiscon- 
sin, and  we  suppose  it  is  clearly  right,  that  where 
the  daily  mail  left  between  9  and  10  o'clock  in  the 
morning  that  was  a  convenient  hour,  and  the  no- 
tice must  be  mailed  so  as  to  catch  that  mail  on  the 


172        NEGOTIABLE  INSTRUMENTS 

day  following  the  day  of  dishonor.  The  notice  may 
be  given  otherwise  than  through  the  postoffice,  and 
then  the  test  is  whether  it  is  given  within  the  time 
that  notice  would  have  been  received  in  due  course 
by  mail  if  it  had  been  properly  sent. 

297.  SECTION  105.— [WHEN  SENDER 
DEEMED  TO  HAVE  GIVEN  DUE  NOTICE.] 
Where  notice  of  dishonor  is  duly  addressed  and 
deposited  in  the  postoffice,  the  sender  is  deemed  to 
have  given  due  notice,  notwithstanding  any  miscar- 
riage in  the  mails. 

298.  TELEGRAPHIC  NOTICE.— The  ques- 
tion may  be  asked  about  a  telegram.  In  one  re- 
spect that  would  be  different  from  the  mail.  Tele- 
graphic notice  would  be  all  right  if  it  were  received 
in  time,  but  if  it  were  not  received  in  time  even 
though  reasonably  sent,  the  telegraph  company's 
misconduct,  or  deficiency  would  not  be  at  the  risk 
of  the  party  to  be  notified,  but  of  the  party  attempt- 
ing to  use  that  means.  It  is  only  the  mail  which 
the  statute  provides  way  be  used  at  the  risk  of  the 
party  to  be  notified. 

299.  SECTION  106.— [DEPOSIT  IN  POST- 
OFFICE;  WHAT  CONSTITUTES.]  Notice  is 
deemed  to  have  been  deposited  in  the  postoffice 
when  deposited  in  any  branch  postoffice  or  in  any 
letter  box  under  the  control  of  the  postoffice  de- 
partment. 

300.  DELIVERY  TO  A  CARRIER.— Under 

the  federal  postal  regulations  it  is  the  duty  of  a  let- 
ter carrier  not  only  to  deliver  letters  but  to  receive 


NEGOTIABLE  INSTRUMENTS        173 

them  when  tendered.  Accordingly  it  may  be  sup- 
posed that  delivery  to  a  letter  carrier  when  he  is 
engaged  in  the  course  of  his  business  would  be  in 
legal  effect  a  deposit  in  the  postoffice. 

301.  SECTION  107.~[NOTICE  TO  SUBSE- 
QUENT PARTY;  TIME  OF.]  Where  a  party 
receives  notice  of  dishonor,  he  has,  after  the  receipt 
of  such  notice,  the  same  time  for  giving  notice  to 
antecedent  parties  that  the  holder  has  after  the  dis- 
honor. 

302.  SUCCESSIVE  NOTICES  TO  SEVERAL 
PARTIES. — When  notice  is  properly  given  to  one 
party  secondarily  liable,  he  has  the  same  time  to 
give  notice  to  antecedent  parties.  This  raises 
rather  a  curious  situation  sometimes.  Suppose  the 
holder  gave  prompt  notice  to  the  last  of  four  or  five 
indorsers,  and  also  gave  notice,  but  not  promptly, 
to  the  first  indorser ;  the  latter  notice  is  ineffective. 
But  suppose  notice  had  been  given  by  the  last  in- 
dorser to  the  one  before,  and  so  in  turn  each  in- 
dorser seasonably  notifies  the  preceding  one  until 
finally  the  first  indorser  is  notified  by  the  second; 
that  is  a  good  notice  to  the  first  indorser,  although 
it  arrives  a  week  or  a  fortnight  later  than  the  other 
one  which  was  a  bad  notice ;  and  under  Section  93, 
that  second  notice  would  not  only  inure  to  the 
benefit  of  the  indorser  who  sent  it,  but  it  would 
inure  to  the  benefit  of  the  holder.  There  is  one 
method  of  sending  notice  to  earlier  indorsers  which 
was  uplield  in  a  case  decided  in  Massachusetts  fifty 


174        NEGOTIABLE  INSTRUMENTS 

or  sixty  years  ago,  but  we  are  not  sure  whether  the 
method  is  commonly  in  use  now ;  that  is,  by  mailing 
notices  to  all  the  indorsers  under  one  cover  to  the 
last  indorser,  leaving  him  to  forward  the  notices  to 
the  earlier  indorsers.  Of  course,  if  he  does  so 
^promptly  there  is  no  doubt  that  such  notices  are 
timely  (Section  107)  and  inure  to  the  benefit  of  the 
holder,  but  it  was  further  held  in  this  case  to  be  a 
proper  method  of  notification,  charging  all  the  in- 
dorsers, even  though  the  last  indorser  did  not  for- 
ward the  notices  to  the  earlier  indorsers.  It  has 
been  held  in  New  York,  however,  that  this  is  not  a 
sufficient  way  of  giving  notice.  It  cannot  be  recom- 
mended as  a  safe  practice. 

303.  SECTION  108.— [WHERE  NOTICE 
MUST  BE  SENT.]  Where  a  party  has  added  an 
address  to  his  signature,  notice  of  dishonor  must  be 
sent  to  that  address;  but  if  he  has  not  given  such 
address,  then  the  notice  must  be  sent  as  follows : — 
(1)  Either  to  the  postoffice  nearest  to  his  place  of 
residence,  or  to  the  postoffice  where  he  is  accus- 
tomed to  receive  his  letters;  or  (2)  If  he  live  in  one 
place,  and  have  his  place  of  business  in  another,  no- 
tice may  be  sent  to  either  place;  or  (3)  If  he  is  so- 
journing in  another  place,  notice  may  be  sent  to  the 
place  where  he  is  so  sojourning. 

But  where  the  notice  is  actually  received  by  the 
party  within  the  time  specified  in  this  act,  it  will  be 
sufficient,  though  not  sent  in  accordance  with  the 
requirements  of  this  section. 

304.  ADDRESS  TO  WHICH  NOTICE 
SHOULD  BE  SENT.— As  we  have  said,  it  is  some- 


NEGOTIABLE  INSTRUMENTS        175 

times  a  safer  thing  to  mail  a  notice  of  dishonor  to  a 
party  secondarily  liable  than  to  attempt  to  deliver 
it  to  him  personally.  In  mailing  a  notice,  however, 
there  is  sometimes  a  difficulty  in  knowing  to  what 
address  the  notice  should  be  sent.  It  is  not  a  bad, 
plan  to  get  parties  to  negotiable  instruments,  in-' 
dorsers  and  drawers,  if  you  are  not  perfectly  sure  of 
their  addresses,  to  write  them  below  their  signa- 
tures on  the  paper.  If  that  is  done  then  notices  sent 
to  these  addresses  will  always  be  sufficient.  If  you 
have  no  such  guide,  then  you  may  properly  mail  a 
notice  to  the  postoffice  where  the  party  to  be  noti- 
fied is  accustomed  to  receive  his  mail  or  the  post- 
office  nearest  to  his  residence.  This  postoffice  may 
be  at  his  place  of  residence  or  at  his  place  of  busi- 
ness. If  his  place  of  residence  and  place  of  business 
are  in  different  places,  a  notice  to  either  is  sufficient. 
If  he  is  temporarily  staying  in  a  place,  notice  may 
be  sent  to  that  place,  and  presumably  it  may  also  be 
sent  to  his  regular  address,  even  though  he  is  so- 
journing somewhere  else.  And  finally,  if  the  notice 
is  actually  received  in  time,  it  does  not  make  any 
difference  how  it  was  received  or  how  it  was  sent. 
A  case  illustrating  the  difficulties  that  may  arise  and 
the  decision  of  a  court  on  such  a  question  is  this :  the 
notary  who  was  to  send  the  notice  inquired  of  sev- 
eral persons  as  to  the  indorser's  address.  The  per- 
sons to  whom  he  spoke  seemed  to  know  about  it. 
They  said  they  thought  that  a  certain  town  was  the 
nearest  town  to  the  farm  where  the  indorser  lived. 


176        NEGOTIABLE  INSTRUMENTS 

The  letter  containing  the  notice  was  sent  accord- 
ingly to  that  address  but  that  did  not  happen  to  be 
the  town  where  the  indorser  received  his  mail,  and 
the  indorser  did  not  receive  the  notice  within  a  reas- 
onable time.  Nevertheless,  it  was  held  to  be  suffi- 
cient under  the  terms  of  the  statute. 

305.  SECTION  109.— [WAIVER  OF  NO- 
TICE.] Notice  of  dishonor  may  be  waived,  either 
before  the  time  of  giving  notice  has  arrived,  or  after 
the  omission  to  give  due  notice,  and  the  waiver  may 
be  express  or  implied. 

306.  NOTICE  MAY  BE  WAIVED.— Notice  of 
dishonor  may  be  waived  just  as  presentment  may 
be  waived.  It  may  be  waived  before  the  dishonor  of 
the  instrument  or  it  may  be  waived  afterwards.  In 
the  latter  case,  it  is  exceptional  that  liability  should 
be  incurred.  The  waiver  after  dishonor  is  in  effect 
a  mere  promise  to  pay  in  spite  of  not  having  re- 
ceived notice;  that  is,  the  so-called  waiver  is  really 
a  promise  without  consideration,  but,  nevertheless, 
it  is  binding. 

307.  SECTION  110.— [WHO  IS  AFFECTED 
BY  WAIVER.]  Where  the  waiver  is  embodied  in 
the  instrument  itself,  it  is  binding  upon  all  parties; 
but  where  it  is  written  above  the  signature  of  an 
indorser,  it  binds  him  only. 

308.  ILLUSTRATIONS      OF      WAIVER 

CASES. — Occasionally  where  the  waiver  is  written 
in  the  instrument  itself  a  question  arises  as  to  the 
number  of  persons  to  whom  it  applies.  If  a  waiver 
is  contained  in  the  body  of  the  instrument  presum- 


NEGOTIABLE  INSTRUMENTS        177 

ably  it  applies  to  all  persons  who  may  become  secon- 
darily liable.  On  the  other  hand,  if  it  is  written 
above  the  signature  of  an  indorser,  it  presumably 
applies  to  the  single  indorser  only  whose  name  is 
written  underneath.  But  one  might  perfectly  well 
write  on  the  back  a  waiver  which  would  apply  to 
anybody  who  might  indorse,  as,  for  instance,  "All 
indorsers  on  this  instrument  waive  notice." 

309.  SECTION  111.— [WAIVER  OF  PRO- 
TEST.] A  waiver  of  protest,  whether  in  the  case 
of  a  foreign  bill  of  exchange  or  other  negotiable  in- 
strument, is  deemed  to  be  a  waiver  not  only  of  a 
formal  protest,  but  also  of  presentment  and  notice 
of  dishonor. 

310.  COMMENT  ON  SECTION  111.— Protest 
is  used  with  exact  propriety  only  in  regard  to  pre- 
sentment by  a  notary  and  a  notice  by  him  embody- 
ing a  statement  of  the  dishonor  of  the  instrument, 
but  the  word  is  constantly  used  by  bankers  and  busi- 
ness men  as  including  broadly  the  necessary  formal 
steps  taken  by  any  holder  to  establish  his  rights 
against  parties  secondarily  liable.  The  statute  gives 
effect  to  this  understanding  of  business  men. 

311.  SECTION  112.— [WHEN  NOTICE  IS 
DISPENSED  WITH.]  Notice  of  dishonor  is  dis- 
pensed with  when,  after  the  exercise  of  reasonable 
diligence,  it  cannot  be  given  to  or  does  not  reach  the 
parties  sought  to  be  charged, 

312.  COMMENT  ON  SECTION  112.— Strictly 
speaking,  not  presentment  or  notice  but  diligence  is 
what  the  law  requires.    If,  therefore,  the  holder  has 


173        NEGOTIABLE  INSTRUMENTS 

exercised  due  diligence  it  makes  no  difference 
whether  there  has  in  fact  been  presentment  or  no- 
tice. It  must  be  remembered,  however,  that  the  ex- 
cuses for  presentment  and  for  notice  are  different, 
and  the  fact  that  one  is  excused  does  not  of  itself 
excuse  the  other. 

313.  SECTION  113.— [DELAY  IN  GIVING 
NOTICE:  HOW  EXCUSED.]  Delay  in  giving 
notice  of  dishonor  is  excused  when  the  delay  is 
caused  by  circumstances  beyond  the  control  of  the 
holder,  and  not  imputable  to  this  default,  miscon- 
duct or  negligence.  When  the  cause  of  delay  ceases 
to  operate,  notice  must  be  given  with  reasonable 
diligence. 

314.  NOTICE  EXCUSED  SOMETIMES.— 
Notice  of  dishonor  is  sometimes  excused,  even 
though  there  is  no  waiver  by  the  party  interested. 
It  may  be  excused  temporarily  or  it  may  be  excused 
permanently.  It  is  excused  temporarily  by  any  cir- 
cumstance beyond  the  holder's  control  and  not  due 
to  his  negligence  which  makes  it  impossible  to  give 
prompt  notice.  As  soon  as  the  cause  for  the  delay 
ceases  to  exist  notice  must  then  be  given.  The 
commonest  illustration  of  this  sort  of  thing  is  where 
the  holder  is  unable,  after  reasonably  diligent  in- 
quiry, to  determine  at  once  the  address  of  the  party 
to  be  notified.  It  may  take  him  some  time  to  find 
an  address.  If  he  is  reasonably  diligent  that  delay 
will  be  excused,  but  as  soon  as  he  can  find  the  ad- 
dress with  reasonable  diligence,  further  delay  will 
not  be  excused. 


NEGOTIABLE  INSTRUMENTS        179 

315.  SECTION  114.— [WHEN  NOTICE 
NEED  NOT  BE  GIVEN  TO  DRAWER.]  Notice 
of  dishonor  is  not  required  to  be  given  to  the  drawer 
in  either  of  the  following  cases: — (1)  Where  the 
drawer  and  drawee  are  the  same  person.  (2)  When 
the  drawee  is  a  fictitious  person  or  a  person  not 
having  capacity  to  contract.  (3)  When  the  drawer 
is  the  person  to  whom  the  instrument  is  presented 
for  payment.  (4)  Where  the  drawer  has  no  right 
to  expect  or  require  that  the  drawee  or  acceptor  will 
honor  the  instrument.  (5)  Where  the  drawer  has 
countermanded  payment. 

316.  COMMENT  ON  SECTION  114.— The 
cases  where  notice  of  dishonor  is  permanently  ex- 
cused may  be  summed  up  thus :  where  the  person  to 
be  notified  had  no  right  to  expect  that  the  maker  or 
drawee  of  the  instrument  would  pay  it,  he  cannot 
complain  if  he  receives  no  notice.  There  are  various 
illustrations  of  that  stated  in  this  section,  and  sub- 
section 4  would  cover  any  case  not  specially  enu- 
merated in  the  other  subsections.  If  the  drawer  and 
drawee  are  the  same  person,  obviously  the  drawer 
knows  when  the  drawee  refuses  to  pay,  therefore 
the  drawer  is  not  entitled  to  notice.  If  the  draweci 
is  a  fictitious  person,  or  one  without  capacity  to  con- 
tract, the  drawer  ought  to  have  known  that  and 
ought  to  have  expected  that  the  result  would  be 
non-payment  of  the  draft,  and  therefore  cannot  ex- 
pect notice.  So,  also,  where  the  drawer  had  no  right 
to  draw  the  instrument,  as  where  he  had  no  funds  or 
no  arrangement  for  payment  of  the  draft,  or  where 


180        NEGOTIABLE  INSTRUMENTS 

he  himself  had  entered  into  any  arrangement  with 
the  drawee  not  to  pay  the  draft,  as  if  he  counter- 
manded payment.  Similar  cases  calling  for  no  fur- 
ther comment  arise  in  regard  to  an  indorser,  and 
are  covered  by  the  next  section.  There  is  also  the 
case  of  either  drawer  or  indorser  being  the  person 
who  really  ought  to  pay  the  instrument,  the  signa- 
ture of  the  party  primarily  liable  being  merely  lent 
for  accommodation.    (Sections  114,  115.) 

317.  SECTION  115.— [WHEN  NOTICE 
NEED  NOT  BE  GIVEN  TO  INDORSEE.]  No- 
tice of  dishonor  is  not  required  to  be  given  to  an  in- 
dorser in  either  of  the  following  cases : — (1)  Where 
the  drawee  is  a  fictitious  person  or  a  person  not  hav- 
ing capacity  to  contract,  and  the  indorser  was 
aware  of  the  fact  at  the  time  he  indorsed  the  instru- 
ment. (2)  Where  the  indorser  is  the  person  to 
whom  the  instrument  is  presented  for  payment.  (3) 
Where  the  instrument  was  made  or  accepted  for  his 
accommodation. 

318.  SECTION  116.— -[NOTICE  OF  NON- 
PAYMENT WHERE  ACCEPTANCE  RE- 
FUSED.] Where  due  notice  of  dishonor  by  non- 
acceptance  has  been  given  notice  of  a  subsequent 
dishonor  by  non-payment  is  not  necessary,  unless  in 
the  meantime  the  instrument  has  been  accepted. 

319.  COMMENT  ON  SECTION  116.— Where 
the  instrument  has  once  been  dishonored  by  non-ac' 
ceptance,  the  parties  secondarily  liable  are  charged, 
if  notice  is  given.  If  an  acceptance  is  subsequently 
taken  by  the  holder,  the  parties  secondarily  liable 
are  again  freed,  but  will  be  once  again  made  liable  if 


NEGOTIABLE  INSTRUMENTS         181 

the  acceptor  fails  to  pay,  and  notice  is  properly 
given  of  this  failure. 

320.  SECTION  117.— [EFFECT  OF  OMIS- 
SION TO  GIVE  NOTICE  OF  NON-ACCEPT- 
ANCE.] An  omission  to  give  notice  of  dishonor  by 
non-acceptance  does  not  prejudice  the  rights  of  a 
holder  in  due  course  subsequent  to  the  omission. 

NOTE. — In  the  Wisconsin  Act  these  words  are  added 
"but  this  shall  not  be  construed  to  revive  any  liability  dis- 
charged by  such  omission." 

321.  KNOWLEDGE  OF  DISHONOR  FOR 
NON-ACCEPTANCE.— There  is  one  other  cir- 
cumstance besides  the  fact  that  paper  is  overdue 
which  will  prevent  a  purchaser  for  value  without 
notice  from  being  a  holder  in  due  course;  that  is, 
knowledge  that  a  bill  of  exchange  has  been  dishon- 
ored by  a  refusal  to  accept.  On  the  continent  of 
Europe  a  bill  of  exchange  is  always  presented  for 
acceptance  as  well  as  for  payment  by  a  notary,  and 
if  acceptance  or  payment  is  refused  the  notary 
marks  in  ink  on  the  face  of  the  bill  that  circum- 
stance. Accordingly,  anybody  can  tell,  on  the  con- 
tinent of  Europe,  from  the  face  of  a  bill  of  exchange, 
whether  it  has  been  dishonored  before  maturity. 
But  in  this  country  and  in  England  the  bill  may 
have  been  dishonored  by  refusal  to  accept,  and  a 
right  of  action  may  have  accrued  against  the  draw- 
er, and  yet,  maturity  not  having  come,  a  purchaser 
may  have  bought  the  instrument  in  good  faith. 
Such  a  purchaser  will  be  a  holder  in  due  course,  al- 
though if  he  had  notice  of  the  dishonor  for  non-ac- 


182        NEGOTIABLE  INSTRUMENTS 

ceptance,  he  would  not  be  a  holder  in  due  course, 
even  if  he  bought  before  maturity  of  the  bill  (see 
further  Section  133),  and  if  a  holder  in  due  course 
he  can  charge  the  parties  to  the  bill,  even  though 
they  have  been  discharged  so  far  as  a  prior  holder 
was  concerned  by  his  failure  to  give  them  due  notice 
of  the  dishonor  for  non-acceptance. 

322.  SECTION  118.—[WHEN  PROTEST 
NEED  NOT  BE  MADE;  WHEN  MUST  BE 
MADE.]  Where  any  negotiable  instrument  has 
been  dishonored  it  may  be  protested  for  non-accept- 
ance or  non-payment,  as  the  case  may  be;  but  pro- 
test is  not  required  except  in  the  case  of  foreign  bills 
of  exchange. 

323.  IMPORTANCE  OF  PROTEST.— Protest 
is  the  most  certain  way  to  prove  the  facts,  showing 
that  secondary  parties  to  a  negotiable  instrument 
have  been  charged ;  therefore  it  is  frequently  desir- 
able even  where  not  legally  essential.  At  common 
law  a  protest  was  required  in  only  one  case ;  that  is, 
on  the  dishonor  of  foreign  bills.  The  statute  now 
makes  the  protest  evidence  in  regard  to  the  dis- 
honor of  any  negotiable  instrument. 

Article  VIII— Discharge  of  Negotiable  Instruments 

324.  SECTION  119.— [INSTRUMENT;  HOW 
DISCHARGED.]  A  negotiable  instrument  is  dis- 
charged:— (1)  By  payment  in  due  course  by  or  on 
behalf  of  the  principal  debtor.  (2)  By  payment  in 
due  course  by  the  party  accommodated,  where  the 
instrument  is  made  or  accepted  for  accommodation. 


NEGOTIABLE  INSTRUMENTS        183 

(3)  By  the  intentional  cancellation  thereof  by  the 
holder.  (4)  By  any  other  act  which  will  discharge 
a  simple  contract  for  the  payment  of  money.  (5) 
When  the  principal  debtor  becomes  the  holder  of 
the  instrument  at  or  after  maturity  in  his  own  right. 
NOTE. — In  the  Illinois  Act  subsection  (4)  is  omitted. 

325.  DISCHARGE  OF  INSTRUMENT.— The 
discharge  of  an  instrument  is  a  kind  of  absolute  de- 
fence. An  instrument  is  discharged,  first,  by  pay- 
ment in  due  course  by  the  principal  debtor.  "In 
due  course"  means  at  or  after  maturity.  A  pay- 
ment before  maturity  does  not  discharge  the  instru- 
ment. That  would  not  be  an  absolute  defence.  One 
who  purchased  a  note  before  maturity  which  had  in 
fact  been  paid  could  collect  again.  Even  if  the  pay- 
ment is  made  in  due  course, — that  is,  at  or  after 
maturity, — it  must  be  made  by  or  on  behalf  of  the 
principal  debtor.  A  payment  by  an  indorser  at  or 
after  maturity  would  not  discharge  the  instrument ; 
the  maker,  of  course,  would  still  be  liable  on  it.  But 
the  second  paragraph  of  Section  119  provides  that 
payment  in  due  course  by  a  party  accommodated 
would  discharge  the  instrument;  that  is,  if  an  in- 
strument were  made  for  the  accommodation  of  an 
indorser,  pa5mient  by  that  indorser  would  totally 
discharge  the  instrument. 

326.  CANCELLATION.— A  third  method  of 
discharge,  enumerated  in  Section  119,  is  by  the  in- 
tentional cancellation  of  the  instrument.  That  may 
be  regarded  as  the  normal  way  of  discharging  a 


184        NEGOTIABLE  INSTRUMENTS 

negotiable  instrument.  A  negotiable  instrument  is 
looked  on  as  a  formal  thing  which  exists  as  an  obli- 
gation normally  as  long  as  it  exists  uncancelled. 
Destroying  the  instrument  is  destroying  the  obliga- 
tion, so  that  either  tearing  or  punching  holes  in  or 
otherwise  cancelling  an  instrument  is  the  appropri- 
ate way  of  discharging  it,  and  will  discharge  it  even 
if  it  is  done  before  maturity.  A  question  has  arisen 
as  to  the  effect  of  an  intended  cancellation  before 
maturity,  which  was  not  done  so  effectively  as  to 
be  ineradicable.  There  were  certain  notes  of  the 
District  of  Columbia  which  were  taken  up  be- 
fore maturity  and  stamped  as  paid  with  a  rubber 
stamp,  but  they  were  not  punched  or  the  paper  oth- 
erwise destroyed  or  mutilated.  Somebody  got  hold 
of  them,  washed  off  the  marks  of  the  rubber  stamp 
and  negotiated  them  again  before  maturity.  The 
Supreme  Court  of  the  United  States  held  that  the 
notes  had  been  effectively  cancelled  and  could  not 
be  enforced,  even  by  a  holder  in  due  course.  The 
court,  we  think,  regarded  the  cancellation  as  on  the 
whole  not  negligently  done.  It  would  seem  to  us 
as  if  a  holder  in  due  course  ought  to  be  able  to  col- 
lect on  such  an  instrument  if  the  cancellation  were 
really  done  so  carelessly  as  to  invite  alteration  by 
rubbing  out  the  marks  of  cancellation.  To  be  effec- 
tual, cancellation  must  be  intentional.  Strictly  at 
common  law  even  unintentional  cancellation  des- 
troyed the  obligation,  because  the  obligation  was 
regarded  as  identical  with  the  instrument  and  not 


NEGOTIABLE  INSTRUMENTS        185 

able  to  survive  its  destruction  or  mutilation;  but 
courts  of  equity  first  compelled  the  issue  of  a  new 
instrument  when  the  original  was  cancelled  acci- 
dentally, or  lost  or  destroyed  accidentally,  and  now 
even  in  a  court  of  common  law  such  an  instrument 
cancelled  by  mistake  or  lost  or  destroyed  would 
still  be  regarded  as  imposing  an  obligation  on  the 
parties  to  it. 

327.  ACTS  WHICH  WOULD  DISCHARGE 
A  SIMPLE  CONTRACT.— The  fourth  method  of 
discharge  enumerated  in  Section  119  is  by  any 
other  act  which  will  discharge  a  simple  contract  for 
the  payment  of  money.  That  is  simply  a  blunder  of 
the  statute.  Among  amendments  in  the  statute 
which  have  been  proposed  is  the  repeal  of  this 
fourth  method  of  discharge.  It  is  a  blunder  for 
this  reason :  in  a  non-negotiable  contract,  that  is  in 
a  simple  contract,  for  the  payment  of  money,  any 
agreement  between  creditor  and  debtor  for  the  dis- 
charge of  the  debt,  if  made  for  good  consideration, 
will  discharge  it.  Thus,  if  the  creditor  agrees  to  take 
a  horse  in  payment  of  a  debt  of  $100  and  the  debtor 
gives  the  horse,  the  debt  is  discharged.  But  sup- 
pose the  case  of  negotiable  note  for  the  payment  of 
money  and  an  agreement  before  maturity  by  the 
payee  to  take  a  horse  in  full  satisfaction,  and  that 
horse  given,  that  would  not  discharge  the  note.  An 
indorsee  of  the  note  before  maturity,  who  took  the 
instrument  in  ignorance  of  the  settlement  and  paid 
value,  would  be  able  to  enforce  it  under  the  law,  as 


186        NEGOTIABLE  INSTRUMENTS 

it  was  before  the  Negotiable  Instruments  Law  was 
enacted,  and  it  is  hard  to  believe  that  the  statute 
can  have  intended  to  change  in  so  essential  a  matter 
the  law  of  negotiable  paper  as  to  alter  that  rule. 

328.  THE  HOLDER  AT  MATURITY  THE 
PRINCIPAL  DEBTOR.— A  final  method  of  dis- 
charge is  stated  in  the  same  section  of  the  Act,  that 
is,  when  the  principal  debtor  becomes  the  holder  at 
or  after  maturity  in  his  own  right.  You  will  see  the 
reason  for  such  a  rule.  If  the  maker  of  a  note  is  the 
owner  of  it  at  maturity,  then  the  duty  to  pay  and 
the  duty  to  receive  payment  are  united  in  the  same 
person  and  they  cancel  each  other.  But  the  maker 
must  be  the  holder  at  maturity  in  his  own  right. 
That  means  if  he  were  the  holder  as  executor  or  as 
trustee,  while  his  obligation  as  maker  was  his  indi- 
vidual personal  obligation,  the  instrument  would 
not  be  discharged. 

329.  SECTION  120.— [WHEN  PERSONS 
SECONDARILY  LIABLE  ON,  DISCHARGED.] 

A  person  secondarily  liable  on  the  instrument  is 
discharged: — (1)  By  any  act  which  discharges  the 
instrument.  (2)  By  the  intentional  cancellation  of 
his  signature  by  the  holder.  (3)  By  the  discharge 
of  a  prior  party.  (4)  By  a  valid  tender  of  payment 
made  by  a  prior  party.  (5)  By  a  release  of  the 
principal  debtor,  unless  the  holder's  right  of  re- 
course against  the  party  secondarily  liable  is  ex- 
pressly reserved.  (6)  By  any  agreement  binding 
upon  the  holder  to  extend  the  time  of  payment,  or 
to  postpone  the  holder's  right  to  enforce  the  instru- 


NEGOTIABLE  INSTRUMENTS         187 

ment,  unless  made  with  the  assent  of  the  party  sec- 
ondarily liable,  or  unless  the  right  of  recourse 
against  such  party  is  expressly  reserved. 

NOTE.— In  the  Illinois  Act  subsection  (3)  reads:  "(3) 
By  a  valid  tender  of  payment  made  by  a  prior  party."  To 
subsection  5  there  is  added  "or  unless  the  principal  debtor  be 
an  accommodating  party."  Subsection  (6)  is  amended  to 
read  as  follows :  "By  an  agreement  in  favor  of  the  principal 
debtor  binding  upon  the  holder  to  extend  the  time  of  pay- 
ment, or  to  postpone  the  holder's  right  to  enforce  the  instru- 
ment, unless  made  with  the  assent,  prior  or  subsequent,  of 
the  party  secondarily  liable,  or  unless  the  right  of  recourse 
against  such  party  is  expressly  reserved,  or  unless  the  prin- 
cipal debtor  be  an  accommodating  party."  In  the  Missouri 
Act  there  is  added  to  subsection  (3)  "except  when  such  disr 
charge  is  had  in  bankruptcy  proceedings."  In  the  Wiscon- 
sin Act  there  is  inserted  a  new  subsection :  (4a)  By  giving 
up  or  applying  to  other  purposes  collateral  security  appli- 
cable to  the  debt,  or,  there  being  in  the  holder's  hands  or» 
within  his  control  the  means  of  complete  or  partial  satisfac- 
tion, the  same  are  applied  to  other  purposes."  The  words 
"prior  or  subsequent"  are  inserted  after  "assent"  in  sub- 
section (6)  and  the  words  "or  unless  he  is  fully  indemnified" 
are  added  to  the  subsection.  In  the  Maryland  and  New 
York  Acts  the  words  "unless  made  with  the  assent  of  the 
party  secondarily  liable,  or"  in  subsection  (6)  are  omitted. 

330.  DISCHARGE  OF  SINGLE  OBLIGA- 
TIONS ON  AN  INSTRUMENT.— -An  instrument 
may  be  discharged  as  to  one  party  without  being 
discharged  altogether,  and  Section  49  provides  for 
a  case  which  not  infrequently  happens  in  suits  or 
negotiable  instruments.  When  a  man  sues  on  a 
negotiable  instrument  he  must  trace  his  title  from 
the  payee,  if  it  is  payable  to  order,  until  his  own 
title  accrues.  Now  if  there  are  a  series  of  special 
indorsments,  the  holder  must  prove  every  one  of 
them, — prove  that  they  were  made  by  the  person 


188        NEGOTIABLE  INSTRUMENTS 

who  purported  to  make  them ;  but  if  there  is  a  blank 
indorsement  the  holder  may  fill  in  his  name  there, 
and  frequently,  where  there  is  a  special  indorsement 
subsequent  to  a  blank  indorsement,  the  holder  will 
cross  out  the  special  indorsement  so  as  to  leave  the 
blank  indorsement  as  the  last  one ;  then  he  can  fill  in 
his  own  name  in  the  blank.  But  if  he  does  that  the 
indorser  whose  name  is  struck  out  is  discharged ;  it 
is  a  cancellation  of  his  obligation.  Accordingly, 
one  wants  to  be  sure  before  striking  out  an  indorse- 
ment in  this  way  that  the  other  parties  are  suffi- 
ciently responsible  to  make  the  collection  of  the  in- 
strument certain. 

331.  DISCHARGE  OF  JOINT  DEBTOR  OR 
SURETY. — We  now  come  to  a  rather  troublesome 
matter  of  personal  defences  which  must  be  under- 
stood in  order  to  comprehend  subsections  5  and 
6  of  this  section.  It  presents  this  question.  How 
far  does  a  discharge  or  dealing  with  one  party  to  a 
negotiable  instrument  affect  the  holder's  rights 
against  other  parties  to  the  instrument?  And  there 
are  two  situations  where  this  question  becomes 
especially  important:  one,  where  there  are  joint 
obligors,  either  as  makers  or  as  indorsers,  and  sec- 
ond, where  there  are  parties  bearing  the  relation  to 
one  another  of  principal  debtor  and  surety. 

332.  RELEASE  OF  ONE  JOINT  DEBTOR 
RELEASES  ALL. — A  joint  debtor  stands  in  rather 
a  technical  relation  to  his  creditor,  and  it  was  a  rule 
of  the  common  law  that   a   release   of   one  joint 


NEGOTIABLE  INSTRUMENTS        189 

debtor  released  all.  As  they  could  no  longer,  after 
the  release  of  one,  be  all  bound  jointly,  and  as  that 
was  the  only  relation  entered  into  by  them,  if  one 
was  out  all  in  effect  were  freed.  Similarly  a  judg- 
ment against  one  joint  debtor  discharged  all.  Ac- 
cord and  satisfaction  with  one  discharged  all. 

333.  COVENANTS  NOT  TO  SUE.— A  cove- 
nant not  to  sue  one,  however,  did  not  discharge  all. 
A  covenant  not  to  sue  any  debtor  is  merely  a  con- 
tract with  the  covenantee  that  he  shall  not  be  sued. 
The  covenantor,  the  maker  of  the  obligation,  there- 
fore, though  he  would  make  himself  liable  in  dam- 
ages, might  break  his  contract  not  to  sue  and  never- 
theless sue.  So  the  result  is  if  a  creditor  gives  a 
joint  debtor  a  covenant  never  to  sue  him,  the  credi- 
tor may  nevertheless  sue  him  together  with  the 
other  joint  debtors  (and  the  creditor  would  have  to 
sue  all  of  them  at  once  in  order  to  recover),  and  it 
would  be  no  defence  that  he  had  covenanted  not  to 
sue.  The  suing  creditor  could  say,  "Yes,  I  promised 
not  to  sue  and  I  am  breaking  my  promise,  but  if 
that  results  in  any  damage  to  you,  you  can  sue  me 
for  breaking  my  covenant."  It  might  cause  some 
damage  to  the  covenantee,  but  it  might  not  cause 
any  substantial  damage.  The  creditor  of  joint 
debtors,  though  he  gets,  if  he  succeeds  in  his  action, 
a  joint  judgment  against  them  all,  may  levy  execu- 
tion on  the  property  of  any  of  the  debtors.  He  does 
not  have  to  get  it  equally  from  all.  He  can  go 
wholly  against  one,  and  the  joint  debtors  will  have 


190        NEGOTIABLE  INSTRUMENTS 

to  settle  up  between  themselves  as  to  what  each 
ought  to  pay.  Accordingly,  if  the  creditor  gets  a 
joint  judgment  against  his  joint  debtors  after  he 
has  given  one  of  them  a  covenant  not  to  sue  him,  no 
damage  substantially  will  be  caused  to  that  coven- 
lantee  if  the  creditor  levies  execution  wholly  against 
the  other  debtor.  This,  then,  is  a  summary  of  the 
situation  as  to  joint  debtors.  The  holder  must  not 
release  one  of  them  or  make  accord  and  satisfaction, 
but  he  may,  without  destroying  his  right  of  recov- 
ery against  the  rest,  covenant  not  to  sue  one.  The 
real  effect  of  that  would  be  better  expressed  by  call- 
ing it  a  covenant  not  to  levy  execution  on  any  judg- 
ment against  the  covenantee,  for  that  is  in  sub- 
stance what  it  amounts  to. 

334.  DISCHARGE  OF  SURETY  BY  DEAL- 
ING WITH  PRINCIPAL.— Now  let  us  take  the 
more  troublesome  case  of  the  principal  debtor  and 
surety.  It  is  a  rule  of  the  law,  applicable  not  simply 
to  negotiable  paper,  but  to  contracts  generally,  that 
a  surety  may  be  discharged  by  several  kinds  of 
dealing  with  the  principal  debtor.  The  surety  will 
be  discharged,  first,  by  any  release  of  the  principal 
debtor ;  second,  by  any  change  in  the  nature  of  the 
obligation  made  by  agreement  with  the  principal 
debtor ;  and  third,  by  any  dealing  with  the  collateral 
put  up  by  the  principal  debtor  in  a  way  not  war- 
ranted by  the  original  agreement,  (even  though  the 
principal  debtor  after  the  original  agreement  may 
have  authorized  this  dealing  with  the  collateral). 


NEGOTIABLE  INSTRUMENTS        191 

or  by  the  refusal  to  accept  a  tender  of  payment  by 
the  principal  debtor.  The  reason  why  the  surety  is 
discharged  in  all  these  cases  is  broadly  that  he  has 
agreed  to  go  security  for  an  obligation  on  certain 
terms,  and  it  is  not  fair  to  him  to  try  to  hold  him  as 
security  when  the  situation  has  changed.  Of 
course  it  has  changed  materially  if  the  principal 
debtor  is  released,  and  the  obligation  would  be 
thrown  wholly  on  the  surety.  It  is  less  obvious, 
perhaps,  but  still  clear,  that  it  is  unfair  to  the  surety 
if  any  agreement  is  made  with  the  principal  debtor 
whereby  the  terms  of  the  obligation  are  otherwise 
altered. 

335.  GIVING  TIME  TO  THE  PRINCIPAL.— 
The  commonest  kind  of  alteration  of  the  terms  of 
the  obligation  of  the  principal  debtor  is  by  what  is 
called  giving  him  time;  that  is,  extending  the  time 
of  his  obligation.  Suppose  a  maker  of  a  note  is  the 
principal  debtor  and  an  indorser  is  surety.  The 
note  is  due  on  February  1.  A  contract  is  made  with 
the  maker  that  he  shall  have  until  February  15  to 
pay  that  note.  That  will  discharge  the  indorser. 
This  does  not  rest  on  any  principle  of  negotiable 
paper.  It  would  be  the  same  if  instead  of  a  note  we 
had  said  a  bond  with  a  surety,  maturing  at  a  certain 
time,  and  an  agreement  was  made  with  the  princi- 
pal debtor  to  extend  the  bond  for  a  month.  But 
now  in  order  that  this  giving  of  time  or  any  other 
change  in  the  obligation  shall  have  the  effect  of 
which  we  speak,  it  is  essential  that  the  agreement  to 


192        NEGOTIABLE  INSTRUMENTS 

give  time  or  to  make  any  other  change  shall  be 
binding.  It  must  be  a  binding  contract  with  the 
principal  debtor.  If  the  holder  of  the  note  of  which 
we  have  spoken  should  merely  say  to  the  maker, 
"You  may  have  until  the  15th  of  February;  until 
then  we  shall  not  press  you,"  that  would  not  dis- 
charge the  indorser,  providing  that  presentment 
had  been  made  at  maturity  and  notice  given  ac- 
cording to  the  rules  of  negotiable  paper.  In  the 
case  as  we  have  last  put  it  the  creditor  has  made  no 
binding  contract  to  hold  the  obligation  open  until 
February  15.  The  creditor  has  promised  to  do  so, 
but  there  has  been  no  consideration  for  that  prom- 
ise. If,  however,  the  parties  made  a  bargain  by 
which  the  maker  agreed  to  pay  the  interest  until 
February  1 5  in  return  for  promise  by  the  holder  not 
to  enforce  the  note  until  that  date,  then  you  would 
have  a  binding  contract  and  the  surety  would  be 
discharged.  It  follows,  of  course,  that  any  cove- 
nant not  to  sue  the  principal  debtor  discharges  the 
surety;  since  a  covenant  is  under  seal  and  binding 
without  consideration. 

336.  DEALING  WITH  COLLATERAL.— The 
third  way  of  discharging  a  surety  that  we  spoke  of, 
by  dealing  with  collateral,  not  infrequently  arises 
in  dealings  with  banks.  Collateral  is  put  up  for  an 
indorsed  note,  and  the  maker  wants  to  make  a  sub- 
stitution of  collateral  and  is  allowed  to  do  so  by  the 
bank.  Unless  there  was  something  in  the  terms  of 
the  original  bargain  to  which  the  surety  was  a  party 


NEGOTIABLE  INSTRUMENTS        193 

which  allowed  that  substitution  of  collateral,  the 
bank  will  lose  its  right  against  the  indorser  if  it  per- 
mits the  substitution  of  collateral  without  the  in- 
dorser's  assent.  You  will  readily  see  the  reason  of 
this  when  your  attention  is  called  to  the  fact  that 
the  surety — the  indorser — is  as  much  interested  in 
the  sufficiency  of  the  collateral  as  the  bank  is.  If 
the  collateral  is  insufficient  the  surety  will  have  to 
answer  for  the  consequences.  Accordingly,  the 
surety  has  a  right  to  be  consulted  if  there  is  any 
question  of  substituting  different  collateral  from 
that  which  was  originally  put  up  with  the  note. 
Even  more  clearly  if  the  principal  debtor  tenders 
payment  and  the  creditor  refuses  to  accept  it.  he 
cannot  thereafter  hold  the  surety. 

337.  DIFFERENT  WAYS  IN  WHICH  SURE- 
TIES ARE  LIABLE.— Now  sureties  may  be  liable, 
either  jointly  with  the  principal  debtor,  or  jointly 
and  severally,  or  severally.  Moreover,  the  surety 
may  or  may  not  be  evidently  such  by  the  terms  of 
the  instrument.  On  a  promissory  note  with  in- 
dorsements the  maker  is  at  least  apparently  the 
principal  debtor  and  as  to  him  the  indorsers  are 
sureties.  Moreover  a  party  may  be  a  principal 
debtor  with  reference  to  one  party,  and  a  surety 
with  reference  to  another.  Thus  the  first  indorser 
is  a  principal  with  reference  to  the  second  indorser, 
but  a  surety  with  reference  to  the  maker.  But  where 
signatures  are  for  accommodation,  it  may  happ-n 
that  one  who  seems  to  be  the  principal  debtor  is 


194        NEGOTIABLE  INSTRUMENTS 

really  only  a  surety,  or  the  principal  debtor  and 
surety  may  promise  jointly.  One  of  the  joint  mak- 
ers of  a  note  may  be  a  surety.  If  he  is,  sometimes 
the  note  says  so;  sometimes  it  does  not.  If  the 
surety  and  principal  debtor  are  joint  obligors  you 
have  to  look  out  both  for  the  difficulties  previously 
referred  to  as  inherent  in  the  situation  of  joint 
debtors,  and  also  for  the  difficulties  always  inherent 
in  the  relation  of  principal  and  surety.  These  two 
things  must  be  separately  looked  out  for. 

338.  EXPRESS  RESERVATION  OF 
RIGHTS. — There  is  one  qualification,  however,  in 
regard  to  what  we  have  said  about  the  effect  of  a 
release,  either  of  a  joint  debtor  or  of  a  surety.  It  is 
held  that  by  express  reservation  of  the  creditor's 
right  against  a  surety,  or  against  a  joint  debtor  who 
is  not  a  surety,  the  creditor  may  retain  his  rights. 
In  effect  the  instrument  though  called  a  release  with 
reservation  of  rights  is  treated  by  the  law  as  though 
it  were  merely  a  covenant  not  to  levy  execution  on 
the  discharged  debtor.  Let  us  see  how  this  works 
out.  If  a  creditor  releases  a  joint  debtor  who,  we 
will  suppose,  is  also  the  principal  debtor,  with  res- 
ervation of  rights  against  the  surety,  the  creditor 
must  sue  both  parties  if  he  wants  to  collect  against 
anybody,  but  then  he  will  levy  execution  against  the 
surety.  The  surety  will  then  sue  the  principal 
debtor  for  indemnification, — for  a  principal  debtor 
is  always  bound  to  indemnify  a  surety  who  has  been 
compelled  to  pay, — and  the  principal   debtor  will 


NEGOTIABLE  INSTRUMENTS         195 

thus  eventually  have  to  pay  the  debt.  The  principal 
debtor  cannot  in  turn  sue  the  creditor,  because  the 
creditor  by  reserving  rights  against  the  surety  had 
bargained  for  the  right  to  collect  from  him  even  if 
the  consequence  of  so  doing  involved  loss  to  the 
principal  debtor.  The  result  is  that  a  release  with 
reservation  of  rights  given  to  a  principal  debtor  does 
not  do  him  any  ultimate  good.  It  saves  him  from 
having  his  property  directly  seized  by  his  creditor, 
but  as  soon  as  the  surety  is  forced  to  pay,  that 
surety  will  then  sue  the  released  principal  debtor 
and  collect  from  him.  As  a  practical  matter  the 
moral  is:  if  you  are  releasing  any  party  to  a  nego- 
tiable instrument,  or,  indeed,  to  any  contract,  al- 
ways insert  a  reservation  of  rights  against  all  other 
parties  if  you  don't  mean  to  discharge  the  whole  in- 
strument. If  one  simply  follows  this  rule  in  every 
case  it  will  be  unnecessary  to  think  out  in  just  what 
cases  the  release  might  be  fatal  and  in  what  case  it 
might  not  be.  Always  add,  "Reserving,  however, 
all  my  rights  against  other  parties  to  the  instru- 
ment." 

339.  CONCEALED  SURETYSHIP  RELA- 
TION.— Now  as  we  have  said,  the  suretyship  rela- 
tion may  appear  on  the  face  of  things  or  it  may  not. 
On  the  face  of  a  note  made  by  A  and  indorsed  by 
B,  A  appears  to  be  the  party  who  is  the  principal 
debtor  and  B  appears  to  be  the  party  who  is  the 
surety,  but  that  is  not  necessarily  the  fact.  That 
note  may  have  been  made  by  A  for  the  accommoda- 


196        NEGOTIABLE  INSTRUMENTS 

tion  of  B.  In  that  case  B  is  really  as  between  the 
parties  the  principal  debtor,  and  A,  the  maker  of 
the  note,  is  the  surety. 

340.  GIVING  TIME  TO  SURETY  WHO 
DOES  NOT  APPEAR  TO  BE  SUCH.— Now 
what  is  the  effect  of  a  contract  by  a  payee,  the  holder 
of  the  note,  to  give  time  to  A?  Giving  time  to  a 
surety  does  not  discharge  a  principal  debtor,  and  if 
A  is  in  fact  the  surety,  B,  the  principal  debtor,  can- 
not complain  if  time  is  given  to  A.  But  suppose  the 
holder  of  the  instrument,  being  ignorant  that  A  was 
an  accommodation  maker,  and  therefore  was  really 
a  surety,  gave  time  or  a  covenant  not  to  sue  to  B, 
the  indorser,  is  A  discharged?  Can  A  say  to  the 
payee  who  is  holder,  "You  have  given  time  to  B,  the 
indorser,  and  as  he  was  really  the  principal  debtor, 
you  have  changed  the  form  of  the  obligation;  and 
as  I  am  really  a  surety,  though  I  seem  to  be  the 
principal  debtor  (as  I  am  the  maker  of  the  note) ,  I 
am  discharged."  Prior  to  the  passage  of  the  Nego- 
tiable Instruments  Law  the  answer  to  that  question 
depended  on  this:  did  the  payee  or  holder  actually 
know  when  he  gave  time  to  B,  the  indorser,  that  A 
was  really  a  surety  for  B  and  that  B  was  the  princi- 
pal debtor?  If  at  any  time  before  making  the  con- 
tract of  indulgence  the  holder  knew  that  B  was 
really  the  principal  debtor,  then  an  agreement  for 
time  made  with  B  would  discharge  the  surety,  A, 
the  maker  of  the  note.  In  other  words,  the  holder 
had  to  respect  the  suretyship  relation  between  the 


NEGOTIABLE  INSTRUMENTS        197 

parties  as  soon  as  he  had  notice  of  it,  even  though 
he  did  not  know  of  it  at  the  time  he  became  holder 
but  found  it  out  afterwards. 

341.  EFFECT  OF  NEGOTIABLE  INSTRU- 
MENTS LAW. — Now  it  has  been  a  disputed  ques- 
tion under  the  Negotiable  Instruments  Law  wheth- 
er that  law  has  changed  this  rule,  but  the  view 
adopted  by  most  States  which  have  had  the  ques- 
tion before  them  is  that  the  Negotiable  Instruments 
Law  changed  the  rule  of  the  common  law ;  that  the 
language  of  Section  120,  which  is  the  section  in- 
volved, is  such  as  to  indicate  that  the  Legislature 
intended  the  holder  should  only  be  bound  to  con- 
sider who  was  primarily  liable  on  the  instrument, 
and  need  take  no  notice  of  a  suretyship  relation  not 
apparent  on  the  face  of  the  instrument.  It  still  re- 
mains law,  as  it  was  before  the  Negotiable  Instru- 
ments Law,  that  to  give  time  to  a  principal  debtor, 
who  is  prior  on  the  instrument  to  the  surety,  will 
discharge  the  surety ;  but  it  is  probably  not  true  un- 
der the  Negotiable  Instruments  Law,  that  finding 
out  afterwards  that  the  party  subsequent  on  the 
instrument  is  really  the  principal  debtor  compels  <> 
the  holder  to  treat  him  as  such.  In  any  State  where 
the  matter  has  not  yet  been  decided,  however,  the 
only  safe  way  would  be  to  assume  that  the  rule  of 
the  Common  Law  might  still  prevail  and  treat  one 
who  was  discovered  to  be  a  surety  in  the  same  way 
whether  or  not  he  appeared  by  the  instrument  to  be 
such. 


198        NEGOTIABLE  INSTRUMENTS 

342.  SECTION  121.— [RIGHT  OF  PARTY 
WHO  DISCHARGES  INSTRUMENT.]  Where 
the  instrument  is  paid  by  a  party  secondarily  liable 
thereon,  it  is  not  discharged ;  but  the  party  so  pay- 
ing it  is  remitted  to  his  former  rights  as  regards  all 
prior  parties,  and  he  may  strike  out  his  own  and  all 
subsequent  indorsements,  and  again  negotiate  the 
instrument,  except: — (1)  Where  it  is  payable  to  the 
order  of  a  third  person,  and  has  been  paid  by  the 
drawer;  and  (2)  Where  it  was  made  or  accepted 
for  accommodation,  and  has  been  paid  by  the  party 
accommodated. 

343.  COMMENT  ON  SECTION  121.— This 
section  only  becomes  important  where  the  party 
secondarily  liable  derives  title  through  the  prior 
parties  whom  he  is  endeavoring  to  hold  liable.  If, 
when  he  is  remitted  to  his  original  position,  he 
could  not  hold  any  prior  party  liable  on  the  instru- 
ment, it  is  in  effect  totally  discharged. 

344.  SECTION  122.— [RENUNCIATION  BY 
HOLDER.]  The  holder  may  expressly  renounce 
his  rights  against  any  party  to  the  instrument,  be- 
fore, at  or  after  its  maturity.  An  absolute  and  un- 
conditional renunciation  of  his  rights  against  the 
principal  debtor  made  at  or  after  the  maturity  of 
the  instrument  discharges  the  instrument.  But  a 
renunciation  does  not  affect  the  rights  of  a  holder 
in  due  course  without  notice.  A  renunciation  must 
be  in  writing,  unless  the  instrument  is  delivered  up 
to  the  person  primarily  liable  thereon. 

345.  COMMENT  ON  SECTION  122.— Renun- 
ciation is  an  exceptional  kind  of  personal  defence 
that  is  not  allowed  in  contracts  generally  but  only 


NEGOTIABLE  INSTRUMENTS        199 

in  regard  to  negotiable  instruments.  A  holder  of  a 
negotiable  instrument  may  by  simply  writing  to  the 
maker  that  he  renounces  his  rights  on  the  note  dis- 
charge the  maker  so  far  as  this  holder  personally  is 
concerned.  The  maker  will  not  have  an  absolute 
defence  against  a  subsequent  holder  in  due  course, 
but  he  will  have  a  personal  defence  against  the  hold- 
er who  has  thus  renounced  his  rights.  This  is  en- 
tirely different  from  the  law  governing  a  simple 
contract.  If  a  creditor  on  a  simple  contract  agrees 
to  renounce  his  rights  for  any  sum  less  than  the 
face  of  a  liquidated  debt,  the  renunciation  or  the 
agreed  surrender  of  the  creditor's  rights  amounts  to 
nothing.  The  payment  of  part  of  the  debt  is  not 
sufficient  consideration  for  the  agreement  to  sur- 
render the  whole  debt.  Still  more  plainly  is  it  true 
that  the  creditor  cannot  renounce  his  claim  alto- 
gether without  getting  any  payment.  There  would 
be  no  consideration  for  such  an  agreement  on  the 
part  of  the  creditor.  But  in  the  case  of  a  negotiable 
note  w^e  have  just  that  possibility.  The  holder  may, 
without  getting  any  consideration,  renounce  his 
rights  against  the  party  who  really  ought  to  pay  the 
note,  that  is,  the  maker  unless  he  made  the  note  for 
the  accommodation  of  an  indorser.  In  order  to  be 
effective  the  renunciation  must  be  in  writing. 

346.  SECTION  123.— [CANCELLATION; 
UNINTENTIONAL;  BURDEN  OF  PROOF.] 
A  cancellation  made  unintentionally,  or  under  a 
mistake  or  without  the  authority  of  the  holder,  is 


200        NEGOTIABLE  INSTRUMENTS 

inoperative ;  but  where  an  instrument  or  any  signa- 
ture thereon  appears  to  have  been  cancelled  the 
burder  of  proof  lies  on  the  party  who  alleges  that 
the  cancellation  was  made  unintentionally,  or  under 
a  mistake  or  without  authority. 

347.  COMMENT  ON  SECTION  123.— The 
principle  involved  in  this  section  is  the  general  one 
that  loss  or  destruction  by  accident  of  a  negotiable 
instrument  (or  any  other  paper)  is  not  allowed  to 
destroy  the  rights  of  the  owner  of  the  document. 

348.  SECTION  124.~[ALTERATION  OF 
INSTRUMENT;  EFFECT  OF.]  Where  a  nego- 
tiable instrument  is  materially  altered  without  the 
assent  of  all  parties  liable  thereon,  it  is  avoided,  ex- 
cept as  against  a  party  who  has  himself  made,  auth- 
orized or  assented  to  the  alteration,  and  subsequent 
indorsers. 

But  when  an  instrument  has  been  materially  al- 
tered and  is  in  the  hands  of  a  holder  in  due  course, 
not  a  party  to  the  alteration,  he  may  enforce  pay- 
ment thereof  according  to  its  original  tenor. 

NOTE.— In  the  Illinois  Act  the  words  "fraudulently  or" 
(probably  "and"  was  intended)  are  inserted  before  "mate- 
rially" in  Hne  one  and  the  words  "by  the  holder"  after  "al- 
tered" in  the  same  sentence.  In  the  Illinois  Act  the  words 
"fraudulently  or"  (probably  "and"  was  intended)  are  in- 
serted before  "materially"  in  line  one  and  the  words  "by  the 
holder"  after  "altered"  in  the  same  sentence. 

349.  GENERAL  RULE  AS  TO  ALTERA- 
TION.— An  absolute  defence  is  created  by  altera- 
tion, with  which  Sections  124  and  125  of  the  statute 
deal.  Before  the  statute  was  passed  there  were  two 
important  things  to  consider :  first,  was  an  alteration 
material,  and  second,  was  it  fraudulently  made  by 


NEGOTIABLE  INSTRUMENTS       201 

the  holder.  If  an  alteration  was  immaterial  it 
would  not  have  any  effect  whatever.  It  therefore 
became  important  to  decide  what  was  a  material 
alteration.  Indeed,  it  is  still,  and  the  statute  in  Sec- 
tion 125  states  some  of  the  principal  alterations 
which  are  held  material.  Many  of  them,  you  will 
readily  see,  must  be  material,  as,  for  instance,  alter- 
ation of  the  amount,  the  time  or  place  of  payment, 
the  parties,  or  the  medium  of  payment,  but  the  date 
has  also  been  held  material,  and  it  has  even  been 
held  in  England  that  the  number  of  a  note  is  mate- 
rial, and  that  a  change  in  that  creates  a  material 
alteration.  Prior  to  the  statute,  if  an  alteration  was 
material  the  next  questions  were,  was  it  fraudulent 
and  was  it  made  by  the  holder?  If  it  was  not  made 
by  the  holder,  or  if,  though  made  by  the  holder,  he 
made  it  believing  that  he  was  really  making  the 
instrument  express  the  agreement  of  the  parties, — 
as,  for  instance,  if  he  added  to  it  "with  interest  at  5 
per  cent.,"  thinking  to  himself  "that  was  what  we 
agreed," — such  a  change  prior  to  the  statute  would 
not  destroy  the  instrument.  The  alterations  them- 
selves if  not  assented  to  by  the  parties  to  be  charged 
would  not  bind  them.  The  altered  instrument 
would  only  be  effective  as  if  still  in  its  original  form, 
but  it  would  remain  a  valid  instrument  just  as  if  it 
had  remained  unaltered.  To  some  extent  the  Nego- 
tiable Instruments  Law  has  changed  that  and  sub- 
situted  a  harsher  rule.  Section  124  provides  that 
"where  a  negotiable  instrument  is  materially  altered 


202        NEGOTIABLE  INSTRUMENTS 

without  the  assent  of  all  parties  liable  thereon  it  is 
void,  except  as  against  a  party  who  has  himself 
made,  authorized  or  assented  to  the  alteration,  and 
subsequent  indorsers."  If  the  section  stopped  there, 
any  material  alteration,  however  innocent,  would 
make  the  instrument  void,  even  in  the  hands  of  a 
holder  in  due  course,  as  would  all  fraudulent  mate- 
rial alterations.  Section  124,  however,  further  pro- 
vides :  "but  when  an  instrument  has  been  materially 
altered  and  is  in  the  hands  of  a  holder  in  due  course 
not  a  party  to  the  alteration,  he  may  enforce  pay- 
ment thereof  according  to  the  original  tenor."  It 
may  seem  that  this  would  avoid  all  difficulties,  but 
consider  this  case :  a  note  is  made  payable  to  A ;  he, 
without  fraud  and  thinking  it  was  what  the  parties 
agreed,  adds  the  words  "with  interest  at  5  per  cent." 
He  does  not  negotiate  the  instrument,  but  holds  it 
till  maturity.  It  would  seem  that  the  instrument  is 
absolutely  void.  The  second  sentence  does  not  ap- 
ply, since  the  instrument  has  not  been  negotiated 
to  a  holder  in  due  course,  and  the  first  sentence  of 
the  section  says  that  the  altered  instrument  shall 
be  void.  One  may  suppose  a  still  harsher  case :  sup- 
pose an  instrument  is  altered  by  a  third  person  not 
the  holder  (that  sort  of  case  has  not  infrequently 
arisen),  and  suppose  as  before  that  there  is  no  nego- 
tiation of  the  instrument  prior  to  maturity.  It 
seems  under  the  wording  of  this  statute  that  that 
instrument  also  is  void.  In  other  words,  the  holder 
of  an  instrument  must  at  his  peril  keep  it  free  from 


NEGOTIABLE  INSTRUMENTS        203 

material  alterations  not  only  by  himself  but  by  any- 
body else,  and  if  it  once  gets  altered  the  only  safe 
thing  to  do  is  to  sell  it  as  quickly  as  he  can  before 
maturity  to  a  holder  in  due  course.  If  he  does  that 
the  holder  in  due  course  will  be  able  to  recover  on 
the  instrument  according  to  its  original  tenor,  but 
if  the  instrument  is  held  until  after  maturity,  then 
there  cannot  be  a  holder  in  due  course,  since  a  pur- 
chaser after  maturity  is  not  so  designated,  and  the 
original  holder  himself  cannot  recover. 

350.  RAISED  CHECKS.— Perhaps  the  com- 
monest kind  of  alteration  in  bank  business  is  a 
raised  check.  If  a  check  is  raised  and  paid  by  a 
bank,  the  bank  can  recover  the  excess  payment 
over  and  above  the  original  amount  of  the  check 
from  the  person  to  whom  payment  was  made.  The 
bank  will  not  be  able  to  charge  its  customer  the  full 
amount  which  it  has  paid,  since  the  customer  never 
authorized  payment  of  the  larger  amount;  so  it  is 
essential  for  the  bank's  protection  that  it  should 
recover  from  the  person  to  whom  it  made  payment 
in  excess.  Sometimes  it  can  get  at  this  person,  but, 
of  course,  not  infrequently  the  person  to  whom  pay- 
ment is  made  is  a  rascal  and  makes  good  his  escape, 
or  else  is  irresponsible  when  caught ;  then  the  bank 
would  like  very  much  to  charge  up  the  full  pay- 
ment to  its  customer,  and  though  it  cannot  gener- 
ally do  that,  there  is  one  case  where  it  has  been 
urged  that  the  bank  ought  to  be  able  to  do  it.  These 
are  the  facts  of  a  leading  case  in  England:  a  man 


204        NEGOTIABLE  INSTRUP.IENTS 

was  going  away  from  home  and  he  left  with  his 
wife  a  number  of  signed  blank  checks.  She  filled  in 
the  amount  of  one  of  these  very  carelessly,  so  that  it 
was  perfectly  easy  for  a  fraudulent  holder  of  the 
check  to  add  other  words  and  figures  and  so  raise 
(the  check;  and  the  bank,  having  paid  it,  claimed 
the  right  to  charge  up  against  its  customer  the  full 
amount  of  the  raised  check  because  his  carelessness 
had  made  possible  the  loss.  The  bank  was  in  that 
case  given  the  right  to  do  so,  and  it  seems  to  us 
that  that  decision  is  right.  It  has,  however,  been 
overruled  in  England  and  in  many  States  of  this 
country  is  not  law.  Apparently,  in  many,  if  not 
most  States,  if  we  draw  a  check  for  $5  and  write 
the  word  "five"  clear  over  at  the  right-hand  side  of 
the  line,  close  up  against  the  word  "dollars,"  and 
also  write  the  figure  "5"  out  at  some  distance  to  the 
right  of  the  dollar  mark,  so  that  it  is  perfectly  easy 
for  any  one  to  write  "one  hundred"  in  front  of  the 
word  "five"  and  insert  two  figures  before  the  figure 
"5,"  still,  our  bank  would  not  be  able  to  charge  that 
check  as  $105  against  us,  though  it  was  deceived  in- 
to paying  that  amount.  We  think  that  is  wrong,  but, 
as  we  say,  we  understand  it  to  be  the  law  in  many 
States.  The  reason  given  in  the  cases  for  that  rule 
is  that  one  is  not  bound  to  anticipate  crime.  With 
all  respect  to  the  law,  it  seems  that  is  a  silly  thing 
to  say.  A  person  who  draws  a  check  in  the  way 
which  we  have  suggested  oujjht  to  anticipate 
crime.    Why  is  it  that  banks  and  other  persons  who 


NEGOTIABLE  INSTRUMENTS        205 

draw  large  checks  commonly  adopt  stamping  de- 
vices of  one  sort  or  another  to  fix  the  amount  ?  It  is 
just  because  they  anticipate  the  possibility  of  crime. 
It  seems  to  us  it  may  be  as  negligent  not  to  antici- 
pate crime  if  the  door  is  left  wide  open  for  it  as  not 
to  anticipate  any  other  sort  of  happening  which  is 
likely  to  follow  from  careless  conduct.  But  we 
rather  wonder,  in  view  of  the  law,  in  such  States, 
that  drawers  of  checks  are  as  careful  as  they  are,  for 
apparently  the  burden  is  thrown  wholly  on  the 
bank,  and  the  drawer  is  allowed  to  be  careless. 
Whether  there  is  not  some  limit  to  the  degree  of 
carelessness  which  a  drawer  may  exercise  we  should 
be  interested  to  have  decided.  We  should  like  a 
case  to  come  up  where  the  drawer  had  been  guilty 
of  the  most  extreme  carelessness.  We  should  be  in- 
terested in  seeing  whether  any  court  would  follow 
out  in  such  an  extreme  case  the  principles  that  have 
here  been  criticised. 

351.  SECTION  125.— [WHAT  CONSTI- 
TUTES A  MATERIAL  ALTERATION.]  Any 
alteration  which  changes, — (1)  The  date;  (2)  The 
sum  payable,  either  for  principal  or  interest;  (3) 
The  time  or  place  of  payment;  (4)  The  number  or 
the  relations  of  the  parties;  (5)  The  medium  or 
currency  in  which  payment  is  to  be  made ;  Or  which 
adds  a  place  of  payment  where  no  place  of  payment 
is  specified,  or  any  other  change  or  addition  which 
alters  the  effect  of  the  instrument  in  any  respect,  is 
a  material  alteration. 

352.  COMMENT   ON   SECTION    125.— The 


206        NEGOTIABLE  INSTRUMENTS 

cases  stated  in  the  sub-sections  of  this  section  are 
necessarily  illustrative.  The  general  principle  is 
stated  in  the  last  line  and  a  half  of  the  section.  Other 
illustrations  of  material  alteration  are  the  erasure 
of  the  name  of  an  obligor,  the  insertion  of  a  waiver 
\of  demand  and  notice,  the  addition  or  erasure  of  a 
seal  in  a  jurisdiction  where  seals  alter  the  legal 
effect  of  an  instrument  as  by  allowing  a  longer  stat- 
ute of  limitation.  An  alteration  is  none  the  less 
material  because  the  change  is  advantageous  to  the 
obligor.  To  insert  a  later  day  of  payment,  a  lower 
rate  of  interest,  a  smaller  amount  is  material.  The 
addition  of  a  collateral  guaranty  is  not  material  for 
it  does  not  affect  the  liability  of  the  principal  debtor. 
The  addition,  however,  of  another  name  as  a  joint 
obligor  to  that  of  a  maker  or  indorser  is  material 
since  it  purports  to  make  the  liability  joint  instead 
of  several.  Correcting  a  mistake  in  spelling  or  in 
the  initials  of  a  name,  or  inserting  a  description  of 
security  given  for  the  note,  is  not  material. 


CHAPTER  III 


Title  II  of  the  Negotiable  Instruments  Law 


BILLS  OF  EXCHANGE 


Article  I. — Form  and  Interpretation 

353.  SECTION  126.— [BILL  OF  EXCHANGE 
DEFINED.]  A  bill  of  exchange  is  an  uncondition- 
al order  in  writing  addressed  by  one  person  to  an- 
other, signed  by  the  person  giving  it,  requiring  the 
person  to  whom  it  is  addressed  to  pay  on  demand  or 
at  a  fixed  or  determinable  future  time  a  sum  certain 
in  money  to  order  or  to  bearer. 

354.  COMMENT  ON  SECTION  126.— The 
formal  requirements  of  negotiable  paper  applicable 
to  bills  of  exchange  have  been  considered  in  detail 
in  connection  with  earlier  sections  of  the  Act. 

355.  SECTION  127.— [BILL  NOT  AN  AS- 
SIGNMENT OF  FUNDS  IN  HANDS  OF 
DRAWEE.]  A  bill  of  itself  does  not  operate  as  an 
assignment  of  the  funds  in  the  hands  of  the  drawee 
available  for  the  payment  thereof,  and  the  drawee  is 
not  liable  on  the  bill  unless  and  until  he  accepts  the 
same. 

356.  COMMENT  ON  SECTION  127.— The  fact 
that  a  bill  must  order  the  drawee  to  pay  uncondi- 
tionally, of  itself  indicates  that  it  is  not  an  assign- 
ment of  a  particular  fund ;  if  it  were  it  would  violate 
a  fundamental  principle  of  the  law  of  negotiable 

207' 


208        NEGOTIABLE  INSTRUMENTS 

paper  requiring  an  unconditional  order,  for  that 
means  an  order  to  pay  irrespective  of  the  existence 
of  any  fund. 

357.  SECTION  128.~[BILL  ADDRESSED 
TO  MORE  THAN  ONE  DRAWEE.]  A  bill  may 
be  addressed  to  two  or  more  drawees  jointly,  wheth- 
er they  are  partners  or  not ;  but  not  to  two  or  more 
drawees  in  the  alternative  or  in  succession. 

358.  REASON  FOR  LIMITING  THE  NUM- 
BER OF  DRAWEES.— The  reason  for  not  allow- 
ing several  persons  to  be  drawees  in  the  alternative 
or  in  succession  is  because  the  multiplication  of  pre- 
sentments necessary  in  order  to  charge  the  parties 
secondarily  liable  would  work  practical  inconveni- 
ence. It  is  true  that  somewhat  similar  inconveni- 
ence may  be  caused  by  drawing  on  a  number  of  per- 
sons jointly,  especially  if  they  are  not  partners,  since 
in  that  case  presentment  must  be  made  to  each  of 
them,  but  the  allowance  of  such  a  bill  seems  un- 
avoidable. 

359.  SECTION  129.— [INLAND  AND  FOR- 
EIGN BILLS  OF  EXCHANGE.]  An  inland  bill 
of  exchange  is  a  bill  which  is,  or  on  its  face  purports 
to  be,  both  drawn  and  payable  within  this  State. 
Any  other  bill  is  a  foreign  bill.  Unless  the  contrary 
appears  on  the  face  of  the  bill,  the  holder  may  treat 
it  as  an  inland  bill. 

360.  IMPORTANCE  OF  DISTINCTION  BE- 
TWEEN INLAND  AND  FOREIGN  BILLS.— 
There  are  two  reasons  for  distinguishing  between 
inland  and  foreign  bills ;  the  most  important  reason 


NEGOTIABLE  INSTRUMENTS        209 

is  that  foreign  bills  must  be  protested  by  a  notary, 
whereas  no  formal  protest  is  necessary  in  regard  to 
inland  bills;  the  other  reason  relates  to  a  subject 
called  the  conflict  of  laws.  If  the  law  of  the  jurisdic- 
tion where  a  bill  is  drawn  differs  from  the  law  of  the 
jurisdiction  where  it  is  payable,  it  is  necessary  to 
decide  which  law  governs  the  case.  In  general  the 
law  of  the  place  where  the  bill  is  drawn  governs  the 
nature  and  character  of  the  obligations  assumed  by 
the  parties ;  but  the  law  of  the  place  where  it  is  pay- 
able governs  the  formalities  of  presentment,  protest, 
and  the  necessary  diligence  to  charge  persons  sec- 
ondarily liable. 

361.  SECTION  130.— [WHEN  BILL  MAY  BE 
TREATED  AS  PROMISSORY  NOTE.]  Where 
in  a  bill  drawer  and  drawee  are  the  same  person,  or 
where  the  drawee  is  a  fictitious  person,  or  a  person 
not  having  capacity  to  contract,  the  holder  may 
treat  the  instrument,  at  his  option,  either  as  a  bill  of 
exchange  or  a  promissory  note. 

362.  COMMENT  ON  SECTION  130.— The  rea- 
son for  the  rule  stated  in  this  section  is  that  in  the 
cases  supposed,  the  drawer  in  legal  effect  is  abso- 
lutely bound  to  pay,  whereas  the  drawer  of  an  ordi- 
nary bill  of  exchange  is  only  bound  to  pay  on  con- 
dition that  some  one  else  fails  to  pay  on  presentment 
at  maturity. 

363.  SECTION  131.— [REFEREE  IN  CASE 
OF  NEED.]  The  drawer  of  a  bill  and  any  indorser 
may  insert  thereon  the  name  of  a  person  to  whom 
the  holder  may  resort  in  case  of  need,  that  is  to  say 


210        NEGOTIABLE  INSTRUMENTS 

in  case  the  bill  is  dishonored  by  non-acceptance  or 
non-payment.  Such  person  is  called  the  referee  in 
case  of  need.  It  is  in  the  option  of  the  holder  to 
resort  to  the  referee  in  case  of  need  or  not  as  he  may 
see  fit. 

364.  COMMENT  ON  SECTION  131.— The 
practice  alluded  to  in  this  section  is  probably  not 
common. 

Article  II. — Acceptance 

365.  SECTION  132.— [ACCEPTANCE;  HOW 
MADE,  ET  CETERA.]  The  acceptance  of  a  bill 
is  the  signification  by  the  drawee  of  his  assent  to  the 
order  of  the  drawer.  The  acceptance  must  be  in 
writing  and  signed  by  the  drawee.  It  must  not  ex- 
press that  the  drawee  will  perform  his  promise  by 
any  other  means  than  the  payment  of  money. 

366.  SECTION  133.— [HOLDER  ENTITLED 
TO  ACCEPTANCE  ON  FACE  OF  BILL.]  The 
holder  of  a  bill  presenting  the  same  for  acceptance 
may  require  that  the  acceptance  be  written  on  the 
bill  and,  if  such  request  is  refused,  may  treat  the  bill 
as  dishonored. 

367.  RIGHTS  OF  HOLDER  IN  ACCEPT- 
ANCE.— Though  (as  indicated  by  the  two  follow- 
ing sections)  an  acceptance  may  be  valid  though  not 
written  on  the  face  of  the  bill,  the  holder  of  the  in- 
strument may  require  that  it  shall  be  so  written,  and, 
if  this  request  is  refused,  may  treat  the  bill  as  dis- 
honored. It, is  important  for  a  holder  to  exercise 
this  right  and  not  to  rest  satisfied  with  an  accept- 
ance which  is  not  written  on  the  bill. 


NEGOTIABLE  INSTRUMENTS        211 

368.  SECTION  134.— [ACCEPTANCE  BY 
SEPARATE  INSTRUMENT.]  Where  an  accept- 
ance is  written  on  a  paper  other  than  the  bill  itself, 
it  does  not  bind  the  acceptor  except  in  favor  of  a 
person  to  whom  it  is  shown  and  who,  on  the  faith 
thereof,  receives  the  bill  for  value. 

369.  WHAT  IS  AN  ACCEPTANCE  IN 
WRITING?— It  is  to  be  observed  that  though  an 
acceptance  not  written  on  the  bill  is  in  some  cases  a 
valid  acceptance,  it  must  be  in  writing.  What  is 
such  a  promise  in  writing  as  to  amount  to  an  accept- 
ance may  give  rise  to  question;  especially  whether 
a  telegraphic  promise  is  an  acceptance  in  writing. 
The  promisor  ordinarily  writes  the  message  but  de- 
livers this  writing  to  the  telegraph  company,  which 
gives  another  writing  to  the  promisee.  It  is  prob- 
able that  this  is  sufficient  to  satisfy  the  statute ;  but 
a  promise  over  the  telephone  is  insufficient;  the 
common  practice  of  inquiring  over  the  telephone 
whether  a  draft  or  check  will  be  paid  is  frequently 
convenient,  but  it  must  be  remembered  that  the 
practice  is  not  protected  by  the  Negotiable  Instru- 
ment Law,  and  a  promise  so  made  is  not  an  accept- 
ance within  the  meaning  of  the  Statute,  though  un- 
der some  circumstances  it  may  amount  to  a  simple 
contract. 

370.  SECTION  135.— [PROMISE  TO  AC- 
CEPT; WHEN  EQUIVALENT  TO  ACCEPT- 
ANCE.] An  unconditional  promise  in  writing  to 
accept  a  bill  before  it  is  drawn  is  deemed  an  actual 


212        NEGOTIABLE  INSTRUMENTS 

acceptance  in  favor  of  every  person  who  upon  the 
faith  thereof,  receives  the  bill  for  value. 

371.  COMMENT  ON  SECTION  135.— The 
rule  stated  in  this  section  was  established  in  the 
United  States  as  matter  of  common  law  prior  to 
the  passage  of  the  Negotiable  Instruments  Law.  It 
is  nevertheless  contrary  to  the  custom  of  merchants 
which  requires  the  obligations  of  negotiable  paper 
to  be  written  on  the  paper  itself,  and  is  opposed  to 
the  English  law.  Such  a  right  as  is  here  alluded  to 
would  seem  on  principle  to  constitute  at  most  a  sim- 
ple contract.  The  law,  however,  is  settled  in  the 
United  States  by  the  statute  that  such  a  promise  be- 
comes negotiable  when  the  bill  is  drawn  and  is 
treated  as  if  it  were  part  of  the  bill. 

372.  SECTION  136.— [TIME  ALLOWED  TO 
DRAWEE  TO  ACCEPT.]  The  drawee  is  allowed 
twenty-four  hours  after  presentment,  in  which  to 
decide  whether  or  not  he  will  accept  the  bill ;  but  the 
acceptance  if  given,  dates  as  of  the  day  of  presenta- 
tion. 

373.  COMMENT  ON  SECTION  136.— The 
time  thus  allowed  the  drawee  is  presumably  a  privi- 
lege allowed  him  which  he  need  not  necessarily 
take ;  that  is,  if  he  should  refuse  to  accept  at  the  be- 
ginning of  the  twenty-four  hours,  the  instrument  is 
immediately  dishonored;  the  holder  need  not  wait 
the  remainder  of  the  period  to  see  if  the  drawee  will 
change  his  mind. 

374.  SECTION  137.— [LIABILITY  OF 
DRAWEE    RETAINING    OR    DESTROYING 


NEGOTIABLE  INSTRUMENTS        213 

BILL.]  Where  a  drawee  to  whom  a  bill  is  delivered 
for  acceptance  destroys  the  same,  or  refuses  within 
twenty-four  hours  after  such  delivery,  or  within 
such  other  period  as  the  holder  may  allow,  to  return 
the  bill  accepted  or  non-accepted  to  the  holder,  he 
will  be  deemed  to  have  accepted  the  same. 

NOTE. — ^This  section  is  omitted  in  Illinois  and  South 
Dakota. 

375.  ACCEPTANCE  BY  RETAINING  THE 
BILL. — The  case  referred  to  in  this  section  might 
be  properly  treated  as  a  case  of  dishonor  for 
non-acceptance,  rather  than  as  a  case  of  acceptance. 
Suppose  the  acceptor  takes  twenty-four  hours,  or 
takes  the  matter  under  consideration,  as  the  preced- 
ing section  permits,  it  is  provided  that  his  failure  to 
return  the  instrument,  either  with  or  without  his 
acceptance,  at  the  expiration  of  the  twenty-four 
hours  amounts  to  an  acceptance.  It  would  seem 
that  it  rather  amounts  to  a  wrongful  confiscation  of 
another  person's  property,  but  the  statute  says  that 
it  is  an  acceptance.  That  means  that  there  must  be 
a  demand  at  maturity  for  payment  of  the  instru- 
ment, in  order  to  charge  the  drawer  or  indorsers. 
This  is  a  section  of  the  statute  to  which  an  amend- 
ment has  been  proposed.  It  would  seem  reasonable 
that  when  a  drawee  thus  retains  a  bill  of  exchange 
and  refuses  to  give  it  back,  to  treat  the  bill  as  dis- 
honored rather  than  accepted,  for  the  drawer  ought 
to  be  notified  of  the  situation.  Of  course,  the  case 
is  one  that  does  not  very  often  occur. 


214        NEGOTIABLE  INSTRUMENTS 

376.  SECTION  138.— [ACCEPTANCE  OF  IN- 
COMPLETE BILL.]  A  bill  may  be  acepted  be- 
fore it  has  been  signed  by  the  drawer,  or  while  oth- 
erwise incomplete,  or  when  it  is  overdue,  or  after  it 
has  been  dishonored  by  a  previous  refusal  to  accept, 
or  by  non-payment.  But  when  a  bill  payable  after 
sight  is  dishonored  by  non-acceptance  and  the 
drawee  subsequently  accepts  it,  the  holder  in  the 
absence  of  any  different  agreement,  is  entitled  to 
have  the  bill  accepted  as  of  the  date  of  the  first  pre- 
sentment. 

377.  COMMENT  ON  SECTION  138.— In  con- 
nection with  this  section  must  be  borne  in  mind  the 
rules  previously  considered  in  regard  to  filling 
blanks  in  an  incomplete  instrument.  The  second 
sentence  in  Section  138  expresses  an  obvious  truth. 
An  immediate  right  of  action  arises  on  the  original 
dishonor  by  non-acceptance;  and  thereafter  the 
drawee  has  no  right  to  accept  at  all  unless  the  holder 
allows  him  to.  Accordingly  the  holder  may  insist 
on  any  terms  he  sees  fit  as  a  condition  of  permitting 
the  drawee  to  accept  subsequently.  In  connection 
with  this  point  Section  150  must  be  borne  in  mind 
also.  The  drawer  and  any  indorsers  will  be  dis- 
charged unless  the  holder  treats  the  instrument  as 
dishonored  by  the  original  non-acceptance. 

378.  SECTION  139.— [KINDS  OF  ACCEPT- 
ANCES.] An  acceptance  is  either  general  or  quali- 
fied. A  general  acceptance  assents  without  qualifi- 
cation to  the  order  of  the  drawer.  A  qualified  ac- 
ceptance in  express  terms  varies  the  effect  of  the 
bill  as  drawn. 


NEGOTIABLE  INSTRUMENTS        215 

379.  COMMENT  ON  SECTION  139.— Strictly 
speaking  a  qualified  acceptance  is  no  acceptance  at 
all.  It  is  a  refusal  to  accept  though  unaccompanied 
by  a  promise  to  do  something  different  from  that 
which  the  drawer  ordered. 

380.  SECTION  140.— [WHAT  CONSTI- 
TUTES A  GENERAL  ACCEPTANCE.]  An  ac- 
ceptance to  pay  at  a  particular  place  is  a  general 
acceptance,  unless  it  expressly  states  that  the  bill  is 
to  be  paid  there  only  and  not  elsewhere. 

381.  COMMENT  ON  SECTION  140.— Sup- 
pose such  an  acceptance  as  is  referred  to  in  this  sec- 
tion, must  the  holder  present  the  instrument  at  the 
place  named  in  the  acceptance,  or  at  the  place  where 
the  instrument  is  due  according  to  the  tenor  of  the 
face  of  the  instrument.  Unless  the  acceptance  ex- 
pressly states  that  the  bill  is  to  be  paid  only  in  the 
place  named  in  the  acceptance,  presentment  must 
be  in  the  place  indicated  by  the  drawing.  The  ac- 
ceptor himself  could  not  object  to  presentment  at 
the  place  named  by  him,  but  parties  secondarily 
liable  could  assert  that  the  bill  was  not  dishonored 
unless  presented  at  the  place  where  the  drawer 
ordered  payment  to  be  made.  The  effect  of  the  sec- 
tion is  that  a  place  inserted  in  the  acceptance  is  re- 
garded as  merely  permissive  so  far  as  the  acceptor 
is  concerned.  If  the  words  were  construed  as  mean- 
ing more  than  this,  the  acceptance  would  be  a 
qualified  one  and  therefore  a  dishonor  of  the 
instrument. 


216        NEGOTIABLE  INSTRUMENTS 

382.  SECTION  141.— [QUALIFIED  AC- 
CEPTANCE.] An  acceptance  is  qualified,  which 
is: — (1)  Conditional,  that  is  to  say,  which  makes 
payment  by  the  acceptor  dependent  on  the  fulfill- 
ment of  a  condition  therein  stated.  (2)  Partial, 
that  is  to  say,  an  acceptance  to  pay  part  only  of  the 
amount  for  which  the  bill  is  drawn.  (3)  Local,  that 
is  to  say,  an  acceptance  to  pay  only  at  a  particular 
place.  (4)  Qualified  as  to  time.  (5)  The  accept- 
ance of  some  one  or  more  of  the  drawees,  but  not 
of  all. 

383.  SECTION  142.— [RIGHTS  OF  PAR- 
TIES AS  TO  QUALIFIED  ACCEPTANCE.]  A 
qualified  acceptance  since  it  involves  a  refusal  to 
honor  the  bill  according  to  its  tenor  is  a  dishonor  of 
the  bill.  Therefore,  the  holder  may  refuse  to  take 
such  an  acceptance,  and  if  he  does  not  obtain  an  un- 
qualified acceptance,  may  treat  the  bill  as  dishon- 
ored by  non-acceptance,  with  the  ordinary  conse- 
quences. Therefore,  also,  where  a  qualified  accept- 
ance is  taken  the  drawer  and  indorsers  are  dis- 
charged from  liability  on  the  bill,  unless  they  have 
expressly  or  impliedly  authorized  the  holder  to  take 
a  qualified  acceptance,  or  subsequently  assent  there- 
to. But  when  the  drawer  or  an  indorser  receives 
notice  of  a  qualified  acceptance,  he  must,  within  a 
reasonable  time,  express  his  dissent  to  the  holder, 
or  he  will  be  deemed  to  have  assented  thereto. 

Article  III. — Presentment  for  Acceptance 

384.  SECTION  143.— [WHEN  PRESENT- 
MENT FOR  ACCEPTANCE  MUST  BE  MADE.l 
Presentment  for  acceptance  must  be  made: — (1) 
Where  the  bill  is  payable  after  sight,  or  in  any  other 


NEGOTIABLE  INSTRUMENTS        217 

case,  where  presentment  for  acceptance  is  necessary 
in  order  to  fix  the  maturity  of  the  instrument;  or 
(2)  Where  the  bill  expressly  stipulates  that  it  shall 
be  presented  for  acceptance;  or  (3)  Where  the  bill 
is  drawn  payable  elsewhere  than  at  the  residence  or 
place  of  business  of  the  drawee. 

In  no  other  case  is  presentment  for  acceptance 
necessary  in  order  to  render  any  party  to  the  bill 
liable. 

385.  NECESSITY  OF  PRESENTMENT  FOR 
ACCEPTANCE. — Presentment  is  of  two  sorts: 
presentment  for  acceptance  and  presentment  for 
payment.  Presentment  for  acceptance  is  only  ap- 
propriate for  bills  of  exchange  and  is  not  generally 
necessary,  though  the  holder  of  a  time  bill  is  entitled 
to  demand  that  acceptance  be  made  in  writing  on 
the  bill  and  signed.  In  some  specific  cases  provided 
for  in  this  section,  presentment  for  acceptance  must 
be  made.  The  only  one  of  these  cases  where  you 
might  not  know  without  being  told  that  the  rule 
was  so  is  the  last  named,  requiring  that  where  the 
bill  is  payable  elsewhere  than  at  the  residence  or 
place  of  business  of  the  drawee.  If  a  bill  does  not 
require  presentment  for  acceptance  the  holder  may 
do  just  as  he  chooses  about  it.  If  he  does  present 
the  bill  for  acceptance  and  it  is  dishonored,  he  must 
give  notice  of  dishonor  in  the  same  way  as  if  it  had 
been  presented  for  payment  and  dishonored,  in  order 
to  hold  the  indorsers.  He  cannot  charge  the  indor- 
sers,  if  he  has  so  presented  it  for  acceptance  and  it 
has  been  dishonored,  by  holding  it  until  maturity 


218        NEGOTIABLE  INSTRUMENTS 

and  presenting  it  again,  and  on  refusal  by  the  payee 
giving  prompt  notice  to  the  drawer  and  indorsers. 
(Section  150.)  Nevertheless,  a  holder  in  due  course 
of  such  an  instrument  can  charge  the  drawer  and  in- 
dorsers, although  the  instrument  had  been  dishon- 
ored for  non-acceptance  before  this  holder  took  the 
instrument,  and  though  the  drawer  and  indorsers 
had  no  notice  of  the  dishonor. 

386.  SECTION  144.— [WHEN  FAILURE  TO 
PRESENT  RELEASES  DRAWER  AND  IN- 
DORSER.]  Except  as  herein  otherw^ise  provided, 
the  holder  of  a  bill  which  is  required  by  the  next 
preceding  section  to  be  presented  for  acceptance 
must  either  present  it  for  acceptance  or  negotiate  it 
within  a  reasonable  time.  If  he  fails  to  do  so,  the 
drawer  and  all  indorsers  are  discharged. 

387.  TIME  OF  PRESENTMENT  FOR  AC- 
CEPTANCE.—If  the  bill  is  of  a  sort  which  re- 
quires presentment  for  acceptance,  the  holder  must 
either  negotiate  it  within  a  reasonable  time  or  he 
must  present  it  for  acceptance  within  a  reasonable 
time.  Suppose  the  case  of  a  bill  payable  somewhere 
else  than  at  the  residence  or  place  of  business  of  the 
drawee  and  payable  in  three  months.  The  holder 
must  promptly  present  it  for  acceptance  or  nego- 
tiate it.  Suppose  that  he  does  present  it  within  a 
reasonable  time  and  acceptance  is  refused.  There- 
after, having  waited  more  than  a  reasonable  time, 
suppose  that  he  negotiates  it  for  value  to  a  pur- 
chaser who  knows  nothing  of  the  prior  presentment. 
Probably  that  purchaser  would  not  be  protected, 


NEGOTIABLE  INSTRUMENTS        219 

and  could  not  sue  the  drawer  and  indorsers  because 
he  would  have  notice  from  the  form  of  the  instru- 
ment that  there  must  either  have  been  presentment 
and  dishonor  or  that  the  holder  has  carelessly  failed 
to  make  presentment  within  the  proper  time  for  ac- 
ceptance. If  presentment  for  acceptance  is  made  of 
bills  as  to  which  it  is  not  required  by  the  statute,  it 
may  be  made  at  any  time  the  holder  likes  before 
maturity. 

388.  SECTION  145.[PRESENTMENT;  HOW 
MADE.]  Presentment  for  acceptance  must  be 
made  by  or  on  behalf  of  the  holder  at  a  reasonable 
hour,  on  a  business  day  and  before  the  bill  is  over- 
due, to  the  drawee  or  some  person  authorized  to 
accept  or  refuse  acceptance  on  his  behalf;  and:  (1) 
Where  a  bill  is  addressed  to  two  or  more  drawees 
who  are  not  partners,  presentment  must  be  made 
to  them  all,  unless  one  has  authority  to  accept  or  re- 
fuse acceptance  for  all,  in  which  case  presentment 
may  be  made  to  him  only.  (2)  Where  the  drawee  is 
dead,  presentment  may  be  made  to  his  personal  rep- 
resentative. (3)  Where  the  drawee  has  been  ad- 
judged a  bankrupt  or  an  insolvent  or  has  made  an 
assignment  for  the  benefit  of  creditors,  presentment 
may  be  made  to  him  or  to  his  trustee  or  assignee. 

389.  WHEN  PRESENTMENT  MUST  BE 
MADE. — It  must  be  made  at  a  reasonable  time  of 
any  business  day,  but  one  may  hold  a  bill  thinking 
he  will  not  present  it  for  acceptance,  and  finally 
change  his  mind  and  present  it  for  acceptance  short- 
ly before  maturity.  It  may  be  presented  on  Satur- 
day prior  to  12  o'clock. 


220        NEGOTIABLE  INSTRUMENTS 

390.  TO  WHOM  PRESENTMENT  FOR  AC- 
CEPTANCE MUST  BE  MADE.— If  the  instru- 
ment is  addressed  to  more  than  one  drawee  it  must 
be  presented  to  all  of  them  unless  they  are  partners. 
If  the  drawee  of  a  bill  is  dead,  presentment  must  be 
made  to  his  personal  representatives.  If  he  has  been 
adjudicated  a  bankrupt  it  must  be  presented  either 
to  him  or  to  his  trustees  in  bankruptcy. 

391.  SECTION  146.— [ON  \¥HAT  DAYS 
PRESENTMENT  MAY  BE  MADE.]  A  bill  may 
be  presented  for  acceptance  on  any  day  on  which 
negotiable  instruments  may  be  presented  for  pay- 
ment under  the  provisions  of  sections  seventy-two 
and  eighty-five  of  this  act.  When  Saturday  is  not 
otherwise  a  holiday,  presentment  for  acceptance 
may  be  made  before  twelve  o'clock,  noon,  on  that 
day. 

NOTE. — The  last  sentence  is  omitted  in  Kentucky  and 
Wisconsin. 

392.  SECTION  147.  —  [PRESENTMENT 
WHERE  TIME  IS  INSUFFICIENT.]  Where 
the  holder  of  a  bill  drawn  payable  elsewhere  than  at 
the  place  of  business  or  the  residence  of  the  drawee 
has  not  time  with  the  exercise  ol  reasonable  dili- 
gence to  present  the  bill  for  acceptance  before  pre- 
senting it  for  payment  on  the  day  that  it  falls  due, 
the  delay  caused  by  presenting  tlie  bill  for  accept- 
ance before  presenting  it  for  payment  is  excused 
and  does  not  discharge  the  drawers  and  indorsers. 

393.  COMMENT  ON  SECTION  147.— Here 
again  we  see  that  what  the  law  requires  is  reason- 
able diligence,  not  any  particular  !\^sult,  in  order  to 
charge  parties  secondarily  liable. 


NEGOTIABLE  INSTRUMENTS        221 

394.  SECTION  148.— [WHERE  PRESENT- 
MENT IS  EXCUSED.]  Presentment  for  accept- 
ance is  excused  and  a  bill  may  be  treated  as  dishon- 
ored by  non-acceptance,  in  either  of  the  following 
cases: — (1)  Where  the  drawee  is  dead,  or  has  ab- 
sconded, or  is  a  fictitious  person  or  a  person  not  hav- 
ing capacity  to  contract  by  bill.  (2)  Where,  after 
the  exercise  of  reasonable  diligence,  presentment 
cannot  be  made.  (3)  Where,  although  presentment 
has  been  irregular,  acceptance  has  been  refused  on 
some  other  ground. 

395.  COMMENT  ON  SECTION  148.— Subsec- 
tion 2  in  this  section  covers  all  cases  except  that  in 
subsection  3.  The  principle  expressed  in  the  latter 
subsection  is  of  general  application  in  the  law  of 
contracts.  Where  a  party  to  a  contract  repudiates 
his  obligation,  it  is  unnecessary  to  comply  with  the 
conditions  which  qualify  his  obligation.  The  law 
does  not  compel  a  man  to  do  useless  things,  and  if  a 
party  to  a  negotiable  instrument  or  to  any  contract 
announces  that  he  is  not  going  to  perform  his  duty, 
the  required  performance  from  the  other  side  is  ex- 
cused. 

396.  SECTION  149.— [WHEN  DISHON- 
ORED BY  NON-ACCEPTANCE.]  A  bill  is  dis- 
honored by  non-acceptance: — (1)  When  it  is  duly 
presented  for  acceptance  and  such  an  acceptance  as 
is  prescribed  by  this  act  is  refused  or  cannot  be  ob- 
tained; or  (2)  When  presentment  for  acceptance  is 
excused  and  the  bill  is  not  accepted. 

397.  SECTION  150.— [DUTY  OF  HOLDER 
WHERE  BILL  NOT  ACCEPTED.]    Where  a  bill 


222        NEGOTIABLE  INSTRUMENTS 

is  duly  presented  for  acceptance  and  is  not  accepted 
within  the  prescribed  time,  the  person  presenting  it 
must  treat  the  bill  as  dishonored  by  non-acceptance 
or  he  loses  the  right  of  recourse  against  the  drawer 
and  indorsers. 

398.  COMMENT  ON  SECTION  150.— Though 
a  holder,  as  provided  in  this  section,  must  give 
prompt  notice  of  dishonor  by  non-acceptance,  or  he 
will  discharge  the  drawer  and  indorser,  a  holder  in 
due  course  may  (being  ignorant  of  the  non-accept- 
ance and  taking  before  maturity)  present  the  bill  for 
payment,  and  on  dishonor  for  nonpayment  charge 
the  drawer  and  indorsers.  This  is  impossible  if  any 
notation  on  the  bill  itself  indicates  its  dishonor  for 
non-acceptance,  since  any  one  who  took  such  an  in- 
strument would  be  chargeable  with  notice  of  what 
appeared  on  its  face. 

399.  SECTION  151.— [RIGHTS  OF  HOLDER 
WHERE  BILL  NOT  ACCEPTED.]  When  a  bill 
is  dishonored  by  non-acceptance,  an  immediate  right 
of  recourse  against  the  drawers  and  indorsers  ac- 
crues to  the  holder  and  no  presentment  for  payment 
is  necessary. 

400.  DAMAGES  ON  DISHONOR  FOR  NON- 
ACCEPTANCE.— When  there  is  dishonor  for 
non-acceptance  and  notice  thereof  is  duly  given  to 
the  drawer  and  indorsers,  there  is  an  immediate 
right  against  them  to  recover  the  full  amount  of  the 
bill.  In  the  case  of  a  non-interest  bearing  bill  it  is 
a  clear  profit  to  the  holder  to  have  the  bill  dishon- 
ored for  non-acceptance  rather  than  for  non-pay- 


NEGOTIABLE  INSTRUMENTS        223 

ment.  There  is  no  discount  of  interest  for  the 
period  between  the  day  of  maturity  and  the  day 
when  presentment  for  acceptance  was  made. 

Article  IV— Protest 

401.  SECTION  152.— [In  WHAT  CASES 
PROTEST  NECESSARY.]  Where  a  foreign  bill 
appearing  on  its  face  to  be  such  is  dishonored  by 
non-acceptance,  it  must  be  duly  protested  for  non- 
acceptance,  and  where  such  a  bill  which  has  not 
previously  been  dishonored  by  non-acceptance  is 
dishonored  by  non-payment,  it  must  be  duly  pro- 
tested for  non-payment.  If  it  is  not  so  protested, 
the  drawer  and  indorsers  are  discharged.  Where  a 
bill  does  not  appear  on  its  face  to  be  a  foreign  bill, 
protest  thereof  in  case  of  dishonor  is  unnecessary. 

402.  PURPOSE  OF  PROTEST.— Protest  is  of 
very  old  origin,  and  the  essential  purpose  of  it  is  to 
furnish  the  evidence  of  a  disinterested  person  that 
a  negotiable  instrument  has  been  properly  pre- 
sented and  dishonored. 

403.  MEANING  OF  PROTEST.— Protest  is 
often  used  broadly  to  signify  any  dishonor  of  a 
negotiable  instrument,  but,  of  course,  properly  it 
means  presentment  by  a  notary,  and  his  certifica- 
tion that  an  instrument  has  been  presented  for  pay- 
ment and  dishonored.  Protest  is  only  necessary  in 
regard  to  foreign  bills.  (Section  118.)  A  foreign 
bill  is  one  which  is  drawn  in  one  jurisdiction  and 
payable  in  another.  For  this  purpose  the  different 
States  of  the  Union  are  foreign  to  each  other.   (Sec- 


224        NEGOTIABLE  INSTRUMENTS 

tion  129.)  A  bill  drawn  in  New  York  payable  in 
Boston  is  as  much  a  foreign  bill  for  this  purpose  as 
one  drawn  in  England  payable  here. 

WHAT  MAY  BE  PROTESTED.— Though 
protest  is  not  necessary  for  any  other  negotiable 
instrument,  except  foreign  bills  of  exchange,  includ- 
ing foreign  checks,  it  is  convenient  frequently  to 
protest  other  negotiable  instruments.  The  law  pro- 
vides that  protest  may  be  made  of  other  negotiable 
instruments  (Section  118),  and  the  certificate  of 
protest  is  evidence  in  such  cases,  as  well  as  in  the 
case  of  foreign  bills  of  exchange,  of  the  facts  which 
it  states,  namely,  that  the  instrument  has  been  duly 
presented  and  notice  given.  Statements  in  a  certi- 
ficate of  protest,  however,  whether  of  foreign  bills 
or  of  other  instruments,  are  not  conclusive  evidence 
of  the  facts  which  they  state.  They  are  some  evi- 
dence, but  it  may  be  shown  by  other  evidence  that 
the  instrument  was  not  presented,  or  was  not  pre- 
sented at  the  time  the  certificate  asserts,  or  that  the 
notice  was  not  given  as  therein  asserted. 

404.  SECTION  153.— [PROTEST;  HOW 
MADE.]  The  protest  must  be  annexed  to  the  bill, 
or  must  contain  a  copy  thereof  and  must  be  under 
the  hand  and  seal  of  the  notary  making  it,  and  must 
specify: — (1)  The  time  and  place  of  presentment; 
(2)  The  fact  that  presentment  was  made  and  the 
manner  thereof;  (3)  The  cause  or  reason  for  pro- 
testing the  bill;  (4)  The  demand  made  and  the 
answer  given,  if  any,  or  the  fact  that  the  drawee  or 
acceptor  could  not  be  found. 


NEGOTIABLE  INSTRUMENTS         225 

405.  ESSENTIAL  FACTS  MUST  BE  PUT  IN 
THE  PROTEST.— As  the  purpose  of  protest  is  to 
furnish  evidence  of  the  necessary  presentment,  all 
facts  which  are  necessary  or  useful  for  making  out 
a  case  against  parties  secondarily  liable,  must  be 
put  in  the  protest. 

406.  SECTION  154.— [PROTEST;  BY 
WHOM  MADE.]  Protest  may  be  made  by— (1) 
A  notary  public;  or  (2)  By  any  respectable  resi- 
dent of  the  place  where  the  bill  is  dishonored,  in  the 
presence  of  two  or  more  credible  witnesses. 

407.  WHO  MAY  PROTEST  PAPER.— A  no- 
tary is  of  course  the  ordinary  person  to  make  a  pro- 
test, although  it  is  provided  that  protest  may  also 
be  made  by  any  respectable  resident  of  the  place 
where  the  bill  is  dishonored,  in  the  presence  of  two 
or  more  credible  witnesses.  That  would  perhaps 
lead  to  inquiry  as  to  what  residents  were  respect- 
able and  what  witnesses  were  credible,  and  it  would 
be  very  foolish  to  take  advantage  of  subsection  2 
except  in  case  of  absolute  necessity.  Moreover  as 
the  preceding  section  requires,  as  the  common  law 
required,  a  seal  to  be  attached  to  the  protest,  of 
which  courts,  even  of  another  State,  would  take  no- 
tice as  proving  that  the  paper  was  what  it  pur- 
ported to  be,  it  may  be  questioned  whether  the  per- 
mission given  in  subsection  2  would  be  effective 
in  case  of  a  foreign  (that  is  interstate)  bill. 

408.  SECTION  155.— [PROTEST;  WHEN 
TO  BE  MADE.]     When  a  bill  is  protested,  such 


226        NEGOTIABLE  INSTRUMENTS 

protest  must  be  made  on  the  day  of  its  dishonor, 
unless  delay  is  excused  as  herein  provided.  When 
a  bill  has  been  duly  noted,  the  protest  may  be  sub- 
sequently extended  as  of  the  date  of  the  noting. 

409.  TIME  OF  PROTEST.— The  time  of  pro- 
test is  the  day  of  dishonor,  unless  delay  in  present- 
ment is  excused  for  reasons  which  we  have  previ- 
ously spoken  of.  If  a  bill  has  been  noted  for  pro- 
test, the  protest  may  be  subsequently  written  out 
as  of  the  day  protest  was  noted,  but  this  must  be 
done  exactly.  In  one  case  a  bill  was  noted  for  pro- 
test on  the  24th  of  September.  The  extended  pro- 
test was  dated  the  25th  of  September  and  contained 
a  statement  of  the  25th  of  September  as  the  day  of 
noting.    That  protest  was  held  invalid. 

410.  SECTION  156.— [PROTEST;  WHERE 
MADE.]  A  bill  must  be  protested  at  the  place 
where  it  is  dishonored,  except  that  when  a  bill 
drawn  payable  at  the  place  of  business,  or  residence 
of  some  person  other  than  the  drawee,  has  been  dis- 
honored by  non-acceptance,  it  must  be  protested  for 
non-payment  at  the  place  where  it  is  expressed  to 
be  payable,  and  no  further  presentment  for  pay- 
ment to,  or  demand  on,  the  drawee  is  necessary. 

411.  PLACE  OF  PROTEST.— The  place  of 
protest  is  the  place  where  the  instrument  is  dishon- 
ored, and  that,  of  course,  is  normally  the  place  of 
payment.  There  is  an  exception  to  the  rule  that  a 
bill  must  be  protested  in  the  place  where  it  is  dis- 
honored, namely,  when  it  is  drawn  payable  at  the 
place  of  business  or  residence  of  somebody  other 


NEGOTIABLE  INSTRUMENTS        227 

than  the  drawee,  and  has  been  dishonored  for  non- 
acceptance,  it  must  be  protested  for  non-payment 
at  the  place  where  it  is  expressed  to  be  payable. 

412.  SECTION  157.— [PROTEST  BOTH  FOR 
NON-ACCEPTANCE  AND  NON-PAYMENT.] 
A  bill  which  has  been  protested  for  non-acceptance 
may  be  subsequently  protested  for  non-payment. 

413.  COMMENT  ON  SECTION  157.— The 
statute  also  provides,  in  Section  150,  that  where  a 
bill  is  dishonored  for  non-acceptance,  the  bill  must 
be  treated  as  dishonored  or  the  holder  will  lose  the 
right  of  recourse  against  the  drawer  and  indorsers. 
That  seems  to  mean  that  if  a  protest  for  non-ac- 
ceptance is  duly  made,  the  indorsers  and  drawer 
are  charged  once  for  all.  There  is  no  occasion  then 
for  presentment  for  non-payment.  Section  1 50  also 
seems  to  mean  that  if  the  instrument  is  dishonored 
for  non-acceptance,  and  the  holder  fails  to  notify  the 
parties  secondarily  liable,  they  are  discharged,  and 
in  that  case,  also,  there  is  no  use  to  present  for  pay- 
ment afterwards.  The  only  cases,  then,  that  we 
can  think  of  in  view  of  Section  150,  where  there 
could  be  any  possible  use  in  a  second  presentment,| 
is  (1)  where  the  presentment  for  acceptance  for 
some  reason  or  other  was  not  a  proper  present- 
ment, and  (2)  where  the  place  of  payment  is  some- 
where other  than  the  residence  or  place  of  business 
of  the  drawee.  Of  course  it  may  be  desirable  as  a 
matter  of  business  to  make  a  second  presentment  to 
see  if  the  drawee  will  not  change  his  mind. 


228        NEGOTIABLE  INSTRUMENTS 

414.  SECTION  158.— [PROTEST  BEFORE 
MATURITY  WHERE  ACCEPTOR  INSOL- 
VENT.] Where  the  acceptor  has  been  adjudged  a 
bankrupt  or  an  insolvent,  or  has  made  an  assign- 
ment for  the  benefit  of  creditors,  before  the  bill  ma- 
tures, the  holder  may  cause  the  bill  to  be  pro- 
tested for  better  security  against  the  drawer  and 
indorsers. 

415.  COMMENT  ON  SECTION  158.--This 
follows  the  practice  on  the  continent  of  Europe.  I 
do  not  suppose  it  is  very  common  in  this  country. 

416.  SECTION  159.— [WHEN  PROTEST 
DISPENSED  WITH.]  Protest  is  dispensed  with 
by  any  circumstances  which  would  dispense  with 
notice  of  dishonor.  Delay  in  noting  or  protesting 
is  excused  when  delay  is  caused  by  circumstances 
beyond  the  control  of  the  holder  and  not  imputable 
to  his  default,  misconduct  or  negligence.  When  the 
cause  of  delay  ceases  to  operate,  the  bill  must  be 
noted  or  protested  with  reasonable  diligence. 

417.  COMMENT  ON  SECTION  159.— Again 
we  see  that  the  test  of  the  holder's  duty  in  order  to 
charge  indorsers  or  drawers  is  diligence. 

418.  SECTION  160.— [PROTEST  WHERE 
BILL  IS  LOST,  ET  CETERA.]  When  a  bill  is 
lost  or  destroyed  or  is  wrongly  detained  from  the 
person  entitled  to  hold  it,  protest  may  be  made  on 
a  copy  or  written  particulars  thereof. 

419.  COMMENT  ON  SECTION  160.— The 
law  does  not  permit  the  rights  of  a  holder  of  nego- 
tiable paper  to  be  impaired  by  accidental  loss  or 
destruction  even  though  the  holder  was  guilty  of 


NEGOTIABLE  INSTRUMENTS        229 

negligence.  Therefore  to  protect  the  owner  of  such 
a  bill  in  his  rights  against  parties  secondarily  liable, 
he  is  allowed  to  make  presentment  personally,  or 
(if  strict  protest  by  notary  is  necessary)  by  means 
of  a  copy  or  merely  by  a  statement  of  the  essential 
particulars  of  the  instrument. 

Article  V"" Acceptance  for  Honor 

420.  SECTION  161.— [WHEN  BILL  MAY 
BE  ACCEPTED  FOR  HONOR.]  Where  a  bill 
of  exchange  has  been  protested  for  dishonor  by 
non-acceptance  or  protested  for  better  security,  and 
is  not  overdue,  any  person  not  being  a  party  already 
liable  thereon,  may,  with  the  consent  of  the  holder, 
intervene  and  accept  the  bill  supra  protest  for  the 
honor  of  any  party  liable  thereon,  or  for  the  honor 
of  the  person  for  whose  account  the  bill  is  drawn. 
The  acceptance  for  honor  may  be  for  the  part  only 
of  the  sum  for  which  the  bill  is  drawn  and  where 
there  has  been  an  acceptance  for  honor  for  one  par- 
ty, there  may  be  a  further  acceptance  by  a  different 
person  for  the  honor  of  another  party. 

421.  ACCEPTANCE  AND  PAYMENT  FOR 
HONOR. — The  statute  contains  rather  elaborate^ 
provisions  in  regard  to  acceptance  for  honor  and* 
payment  for  honor  of  a  bill  of  exchange.  We  sup- 
pose that  is  not  of  very  common  occurrence.  The 
purpose  of  it  is  this :  if  we  make  ourselves  liable  for 
another  person's  debt,  or  if  we  pay  another  person's 
debt,  it  is  not  generally  true  that  we  have  a  right  of 
recourse  against  him.    We  have  no  business  to  pay 


23d        NEGOTIABLE  INSTRUMENTS 

another  person's  debts  unless  we  want  to  free  him 
from  liability.  But  in  the  case  of  a  bill  of  exchange 
which  is  dishonored,  that  is  not  true.  An  outsider 
may  accept  or  pay  for  the  honor  of  any  party,  gen- 
erally the  drawee,  rendering  himself  liable,  or  mak- 
ing actual  payment  and  still  have  recourse  against 
the  drawer.  In  order  to  get  this  recourse  against 
the  drawer  it  is  necessary  that  the  bill  shall  be  pre- 
sented to  the  drawee  for  payment  and  protested,  so 
that  the  person  who  accepts  or  pays  for  honor  has 
the  certificate  of  the  notary  to  show  that  he  acted 
only  after  the  drawee  of  the  bill  had  refused  to 
honor  it.  The  statute  is  sufficiently  self-explana- 
tory of  the  general  subject  in  Sections  161-177. 

422.  SECTION  162.— [ACCEPTANCE  FOR 
HONOR;  HOW  MADE.]  An  acceptance  for 
honor  supra  protest  must  be  in  writing,  and  indi- 
cate that  it  is  an  acceptance  for  honor,  and  must  be 
signed  by  the  acceptor  for  honor. 

423.  SECTION  163.— [WHEN  DEEMED  TO 
BE  AN  ACCEPTANCE  FOR  HONOR  OF  THE 
DRAWER.]  Where  an  acceptance  for  honor  does 
not  expressly  state  for  whose  honor  it  is  made,  it  is 
deemed  to  be  an  acceptance  for  the  honor  of  the 
drawer. 

424.  SECTION  164.— [LIABILITY  OF  THE 
ACCEPTOR  FOR  HONOR.]  The  acceptor  for 
honor  is  liable  to  the  holder  and  to  all  parties  to  the 
bill  subsequent  to  the  party  for  whose  honor  he  has 
accepted. 

425.  SECTION  165.— [AGREEMENT  OF  AC- 
CEPTOR  FOR   HONOR.]     The   acceptor   for 


NEGOTIABLE  INSTRUMENTS        231 

honor,  by  such  acceptance  engages  that  he  will  on 
due  presentment  pay  the  bill  according  to  the  terms 
of  his  acceptance,  provided  it  shall  not  have  been 
paid  by  the  drawee,  and  provided  also,  that  it  shall 
have  been  duly  presented  for  payment  and  protested 
for  non-payment  and  notice  of  dishonor  given 
him. 

426.  SECTION  166.— [MATURITY  OF  BILL 
PAYABLE  AFTER  SIGHT;  ACCEPTED  FOR 
HONOR.]  Where  a  bill  payable  after  sight  is  ac- 
cepted for  honor,  its  maturity  is  calculated  from  the 
date  of  the  noting  for  non-acceptance  and  not  from 
the  date  of  the  acceptance  for  honor. 

427.  SECTION  167.— [PROTEST  OF  BILL 
ACCEPTED    FOR    HONOR,    ET    CETERA.] 

Where  a  dishonored  bill  has  been  accepted  for  hon- 
or supra  protest  or  contains  a  reference  in  case  of 
need,  it  must  be  protested  for  non-payment  before 
it  is  presented  for  payment  to  the  acceptor  for 
honor  or  referee  in  case  of  need. 

428.  SECTION  168.— [PRESENTMENT 
FOR  PAYMENT  TO  ACCEPTOR  FOR  HON- 
OR; HOW  MADE.]  Presentment  for  payment  to 
the  acceptor  for  honor  must  be  made  as  follows: — 
(1)  If  it  is  to  be  presented  in  the  place  where  the- 
protest  for  non-payment  was  made,  it  must  be  pre- 
sented not  later  than  the  day  following  its  matur- 
ity. (2)  If  it  is  to  be  presented  in  some  other  place 
than  the  place  where  it  was  protested,  then  it  must 
be  forwarded  within  the  time  specified  in  section 
one  hundred  and  four. 

429.  SECTION  169.— [WHEN  DELAY  IN 
MAKING  PRESENTMENT  IS  EXCUSED.] 
The  provisions  of  section  eighty-one  apply  where 


232        NEGOTIABLE  INSTRUMENTS 

there  is  delay  in  making  presentment   to   the   ac- 
ceptor for  honor  or  referee  in  case  of  need. 

430.  SECTION  170.— [DISHONOR  OF  BILL 
BY  ACCEPTOR  FOR  HONOR.]  When  the  bill  is 
dishonored  by  the  acceptor  for  honor  it  must  be 
protested  for  nonpayment  by  him. 

Article  VI — Payment  for  Honor 

431.  SECTION  171.— [WHO  MAY  MAKE 
PAYMENT  FOR  HONOR.]  Where  a  bill  has 
been  protested  for  non-payment,  any  person  may 
intervene  and  pay  it  supra  protest  for  the  honor  of 
any  person  liable  thereon  or  for  the  honor  of  the 
person  for  whose  account  it  was  drawn. 

432.  SECTION  172.  —  [PAYMENT  FOR 
HONOR;  HOW  MADE.]  The  payment  for  hon- 
or supra  protest  in  order  to  operate  as  such  and  not 
as  a  mere  voluntary  payment  must  be  attested  by 
a  notarial  act  of  honor  which  may  be  appended  to 
the  protest  or  form  an  extension  to  it. 

433.  SECTION  173.— [DECLARATION  BE- 
FORE PAYMENT  FOR  HONOR.]  The  notarial 
act  of  honor  must  be  founded  on  a  declaration  made 
by  the  payer  for  honor  or  by  his  agent  in  that  be- 
half declaring  his  intention  to  pay  the  bill  for  honor 
and  for  whose  honor  he  pays. 

434.  SECTION  174.— [PREFERENCE  OF 
PARTIES  OFFERING  TO  PAY  FOR  HONOR.] 
Where  two  or  more  persons  offer  to  pay  a  bill  for 
the  honor  of  different  parties,  the  person  whose 
payment  will  discharge  most  parties  to  the  bill  is  to 
be  given  the  preference. 

435.  SECTION  175.— [EFFECT  ON  SUBSE- 


NEGOTIABLE  INSTRUMENTS        233 

QUENT  PARTIES  WHERE  BILL  IS  PAID 
FOR  HONOR.]  Where  a  bill  has  been  paid  for 
honor,  all  parties  subsequent  to  the  party  for  whose 
honor  it  is  paid  are  discharged,  but  the  payer  for 
honor  is  subrogated  for,  and  succeeds  to,  both  the 
rights  and  duties  of  the  holder  as  regards  the  party 
for  whose  honor  he  pays  and  all  parties  liable  to 
the  latter. 

436.  SECTION  176.— [WHERE  HOLDER 
REFUSES  TO  RECEIVE  PAYMENT  SUPRA 
PROTEST.]  V/here  the  holder  of  a  bill  refuses  to 
receive  payment  supra  protest,  he  loses  his  right  of 
recourse  against  any  party  who  would  have  been 
discharged  by  such  payment. 

437.  SECTION  177.— [RIGHTS  OF  PAYER 
FOR  HONOR.]  The  payer  for  honor,  on  paying 
to  the  holder  the  amount  of  the  bill  and  the  notarial 
expenses  incidental  to  its  dishonor,  is  entitled  to  re- 
ceive both  the  bill  itself  and  the  protest. 

Article  VII— Bills  in  a  Set 

438.  SECTION  178.— [BILLS  IN  SETS  CON- 
STITUTE ONE  BILL.]  Where  a  bill  is  drawn  in 
a  set,  each  part  of  the  set  being  numbered  and  con- 
taining a  reference  to  the  other  parts,  the  whole  of 
the  parts  constitutes  one  bill. 

439.  BILLS  IN  A  SET.— Another  rather  excep- 
tional sort  of  case  relates  to  bills  in  a  set,  and  this  is 
provided  for  in  Sections  178  to  183.  We  call  the 
case  exceptional,  but,  of  course,  it  is  common 
enough  in  foreign  exchange.  The  reason  is  not 
apparent  why  the  practice  still  persists  of  drawing 


234        NEGOTIABLE  INSTRUMENTS 

such  bills  in  a  set,  each  part  of  which  is  an  original. 
We  do  not  know  why  one  original  and  copies  would 
not  serve  every  useful  purpose;  but  however  this 
may  be,  it  is  common  to  draw  foreign  bills  in  a  set, 
and  each  part  is  as  much  an  original  as  the  others. 
Whichever  one  is  indorsed  first  gives  to  the  in- 
dorser  a  perfect  title  to  the  whole.  If  the  holder  of 
a  bill  in  three  parts  should  indorse  the  three  parts, 
the  first  part  to  A,  then  the  second  to  B,  and  then 
the  third  to  C,  A  becomes  the  owner  of  the  whole 
bill;  he  can  demand  the  other  parts  from  B  and  C. 
It  would  not  matter  if  the  first  indorsed  part  were 
numbered  the  third  in  the  set ;  A  would  still  be  the 
first  man  to  get  an  indorsement,  and  he  therefore 
would  become  owner  of  the  whole  set.  In  spite  of 
the  fact  that  A  is  the  owner  of  the  whole,  if  B  or  C 
should  present  his  part  to  the  drawee,  and  the 
drawee  in  good  faith  accepted  or  paid  the  part  first 
presented  to  him,  the  payment  would  be  a  discharge 
of  the  bill;  but  we  suppose  A,  who  was  the  first 
indorsee,  would  have  a  right  against  the  later  in- 
dorsees B  or  C,  who  got  payment  from  the  drawee. 
A  could  say  to  B  or  C:  "That  money  which  you 
got  really  belongs  to  me,  for  I  was  the  owner  of  the 
bill."  Of  course,  if  the  holder  should  do  as  we  have 
suggested — indorse  for  value  the  three  parts  to  dif- 
ferent persons — he  is  committing  a  fraud.  He  is 
liable  on  his  indorsement  on  every  part  to  whom- 
ever may  have  paid  value  for  that  part.    The  ac- 


NEGOTIABLE  INSTRUMENTS        235 

ceptance  may  be  written  on  any  part,  but  it  must 
be  written  on  only  one  part.  If  it  is  written  on 
more,  the  acceptor  would  be  liable  to  a  holder  of 
each  part  on  which  he  had  written  an  acceptance. 
That  is  a  very  sensible  provision,  and  yet  we  can 
see  no  more  reason  for  requiring  that  acceptance  be 
written  on  one  part  only  than  for  requiring  that  the 
drawer's  name  be  on  one  part  only.  Of  course,  that 
is  merely  saying  again,  the  practice  of  drawing  bills 
in  sets  is  unfortunate.  The  acceptor  cannot  prop- 
erly make  payment  on  any  part  except  the  one  on 
which  his  acceptance  is  written;  that  is,  he  must 
get  that  part  surrendered  to  him  or  he  will  not  be 
discharged. 

440.  SECTION  179.— [RIGHTS  OF  HOLD- 
ERS WHERE  DIFFERENT  PARTS  ARE  NE- 
GOTIATED.] Where  two  or  more  parts  of  a  set 
are  negotiated  to  different  holders  in  due  course, 
the  holder  whose  title  first  accrues  is  as  between 
such  holders  the  true  owner  of  the  bill.  But  noth- 
ing in  this  section  affects  the  rights  of  a  person  who 
in  due  course  accepts  or  pays  the  part  first  pre- 
sented to  him. 

441.  SECTION  180.— [LIABILITY  OF 
HOLDER  WHO  INDORSES  TWO  OR  MORE 
PARTS  OF  A  SET  TO  DIFFERENT  PER- 
SONS.] Where  the  holder  of  a  set  indorses  two 
or  more  parts  to  different  persons  he  is  liable  on 
every  such  part,  and  every  indorser  subsequent  to 
him  is  liable  on  the  part  he  has  himself  indorsed,  as 
if  such  parts  were  separate  bills. 


236        NEGOTIABLE  INSTRUMENTS 

442.  SECTION  181.— [ACCEPTANCE  OF 
BILLS  DRAWN  IN  SETS.]  The  acceptance  may 
be  written  on  any  part  and  it  must  be  written  on  one 
part  only.  If  the  drawee  accepts  more  than  one 
part,  and  such  accepted  parts  are  negotiated  to  dif- 
ferent holders  in  due  course,  he  is  liable  on  every 
such  part  as  if  it  were  a  separate  bill. 

443.  SECTION  182.— [PAYMENT  BY  AC- 
CEPTOR OF  BILLS  DRAWN  IN  SETS.]  When 
the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without 
requiring  the  part  bearing  his  acceptance  to  be  de- 
livered up  to  him,  and  that  part  at  maturity  is  out- 
standing in  the  hands  of  a  holder  in  due  course,  he 
is  liable  to  the  holder  thereon. 

444.  SECTION  183.— [EFFECT  OF  DIS- 
CHARGING ONE  OF  A  SET.]  Except  as  herein 
otherwise  provided  where  any  one  part  of  a  bill 
drawn  in  a  set  is  discharged  by  payment  or  other- 
wise the  whole  bill  is  discharged. 


CHAPTER  IV 


Title  III  of  the  Negotiable  Instruments  Law 


PROMISSORY  NOTES  AND  CHECKS 


Article  I 


445.  SECTION  184.— [PROMISSORY  NOTE 
DEFINED.]  A  negotiable  promissory  note  within 
the  meaning  of  this  act  is  an  unconditional  promise 
in  writing  made  by  one  person  to  another  signed  by 
the  maker  engaging  to  pay  on  demand,  or  at  a  fixed 
or  determinable  future  time,  a  sum  certain  in  money 
to  order  or  to  bearer.  Where  a  note  is  drawn  to 
the  maker's  own  order,  it  is  not  complete  until  in- 
dorsed by  him. 

446.  COMMENT  ON  SECTION  184.— The  re- 
quirements of  this  section  have  been  considered  in 
detail  at  the  beginning  of  the  Act. 

447.  SECTION  185.— [CHECK  DEFINED.] 
A  check  is  a  bill  of  exchange  drawn  on  a  bank  pay- 
able on  demand.  Except  as  herein  otherwise  pro- 
vided, the  provisions  of  this  act  applicable  to  a  bill 
of  exchange  payable  on  demand  apply  to  a  check. 

448.  LIABILITY  OF  DRAWER  OF  A 
CHECK. — As  a  check  is  payable  on  demand  it  does 
not  contemplate  acceptance,  though  certification  of 
the  check  corresponds  to  acceptance  and  imposes 
the  liability  of  an  acceptor  on  the  certifying  bank. 
There  are  three  differences  of  special  importance 


238        NEGOTIABLE  INSTRUMENTS 

between  the  obligation  of  the  drawer  of  a  check  and 
the  obligation  of  the  drawer  of  any  other  kind  of 
demand  bill.  In  the  first  place,  giving  a  check  is  a 
representation  by  the  drawer  that  he  has  funds.  If 
we  draw  a  bill  of  exchange,  which  is  not  a  check,  on 
some  one  and  give  it  to  a  person  who  pays  value  for 
it,  we  are  not  guilty  of  false  representations  merely 
because  we  have  no  right  to  draw  on  the  drawee 
and  he  refuses  to  pay  the  draft  and  is  under  no  duty 
to  pay  it.  We  are  liable  for  breach  of  promise  on 
our  signature  as  drawer,  that  is  all;  but  one  who 
draws  a  check  and  passes  it  represents  that  he  has 
funds  in  the  bank  and  accordingly  he  is  guilty  of 
fraud  and  misrepresentation,  and  is  not  simply 
breaking  a  promise  if  the  check  is  not  paid  for  lack 
of  funds.  The  other  two  differences  are  considered 
under  Sections  186  and  188. 

449.  SECTION  186.— [WITHIN  WHAT 
TIME  A  CHECK  MUST  BE  PRESENTED.]  A 
check  must  be  presented  for  payment  within  a  reas- 
onable time  after  its  issue  or  the  drawer  will  be  dis- 
charged from  liability  thereon  to  the  extent  of  the 
loss  caused  by  the  delay. 

NOTE.— In  the  Illinois  and  South  Dakota  Acts  there  is 
inserted  after  the  word  "issue"  "and  notice  of  dishonor  given 
to  the  drawer  as  provided  for  in  the  case  of  bills  of  ex- 
change." 

450.  INSUFFICIENT  DILIGENCE  DOES 
NOT  ALWAYS  DISCHARGE  THE  DRAWER 
OF  A  CHECK. — The  second  difference  between 
checks  and  ordinary  bills  of  exchange  relates  to  the 


NEGOTIABLE  INSTRUMENTS        239 

effect  of  using  insufficient  diligence  to  charge  the 
drawer.  In  order  to  charge  the  drawer  of  a  bill 
the  instrument  must  be  presented  at  maturity  if  it 
is  a  demand  bill;  and  on  being  so  presented  notice 
must  be  given  promptly  to  the  drawer  if  the  in- 
strument is  dishonored.  If  such  presentment  is  not 
made  or  such  notice  is  not  given  the  drawer  of  a 
bill  is  absolutely  discharged.  But  Section  186  pro- 
vides that  a  check  must  be  presented  for  payment 
within  a  reasonable  time  after  its  issue  (that  is, 
like  any  bill)  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by 
the  delay.  Those  last  words  lay  down  an  entirely 
different  rule  from  that  applicable  in  case  of  a  bill 
of  exchange  which  is  not  a  check.  The  drawer  of 
such  a  bill  of  exchange  would  be  absolutely  dis- 
charged. The  drawer  of  a  check  is  not  discharged 
except  to  the  extent  of  the  loss  caused  by  the  delay, 
and  usually,  unless  the  drawee  bank  fails,  there  will 
be  no  loss  caused  by  the  delay.  This  section  of  the 
Negotiable  Instruments  Law  says  nothing  about 
what  would  be  the  effect  of  a  failure  to  give  prompt 
notice  to  the  drawer  in  case  a  check  was  dishonored. 
As  the  statute  does  say  (Section  185)  that  the  rule 
as  to  checks  is  the  same  as  the  rule  governing  bills 
of  exchange  in  all  matters  not  specifically  stated,  the 
effect  of  the  statute  seems  to  be  that  though  delay 
in  presenting  a  check  discharges  the  drawer  only  to 
the  extent  he  was  injured,  delay  in  notifying  the 


240        NEGOTIABLE  INSTRUMENTS 

drawer  of  the  dishonor  of  the  check  absolutely  dis- 
charges him,  just  as  it  does  the  drawer  of  an  ordi- 
nary bill  of  exchange.  Probably  this  is  a  blunder 
in  the  Negotiable  Instruments  Law.  The  law  be- 
fore the  statute  was  that  delay  in  giving  notice  of 
dishonor  was  no  more  serious  than  delay  in  making 
presentment  in  the  case  of  checks. 

451.  SECTION  187.— [CERTIFICATION  OF 
CHECK;  EFFECT  OF.]  Where  a  check  is  certi- 
fied by  the  bank  on  which  it  is  drawn,  the  certifica- 
tion is  equivalent  to  an  acceptance. 

452.  COMMENT  ON  SECTION  187.— This 
section  must  be  taken  subject  to  the  qualification  in 
the  following  section. 

453.  SECTION  188.— [EFFECT  WHERE 
THE  HOLDER  OF  CHECK  PROCURES  IT  TO 
BE  CERTIFIED.]  Where  the  holder  of  a  check 
procures  it  to  be  accepted  or  certified  the  drawer 
and  all  indorsers  are  discharged  from  liability 
thereon. 

454.  EFFECT  OF  CERTIFICATION  OF  A 
CHECK  ON  THE  DRAWER'S  LIABILITY.— 

The  third  difference  between  the  drawer  of  a  check 
and  the  drawer  of  an  ordinary  bill  of  exchange  is 
stated  in  this  section.  Certification  of  a  check  cor- 
responds in  the  main  to  an  acceptance  of  the  bill,  as 
has  been  said,  but  if  the  acceptor  of  an  ordinary  bill 
fails  to  pay  at  maturity,  the  holder  can  notify  the 
drawer  and  charge  him.  In  the  case  of  certification 
of  a  check,  however,  a  distinction  is  taken.  If  the 
certification  is  obtained  by  the  drawer  of  the  check 


NEGOTIABLE  INSTRUMENTS        241 

before  delivery  to  the  payee,  the  situation  is  just  the 
same  as  in  the  case  of  an  accepted  bill  of  exchange. 
The  holder,  if  he  does  not  get  his  money  from  the 
certifying  bank,  can  sue  the  drawer  of  the  check; 
but  if  the  holder  of  a  check  himself  gets  it  certified 
he  thereby  discharges  the  drawer.  The  reason  for 
the  distinction  is  this :  a  check  is  an  instrument  pay- 
able on  demand,  and  the  normal  thing  for  the  holder 
of  a  check  to  do  is  to  get  his  money.  If  he  goes  to 
a  bank  and  asks  for  a  certification  he  is  not  doing 
the  normal  thing,  and  it  would  not  be  fair  to  allow 
him  to  extend  the  liability  of  the  drawer  by  keeping 
the  check  outstanding  when  he  might  have  got  his 
money  instead  of  the  certification  when  he  pre- 
sented the  check.  With  the  exception  of  those  three 
differences  the  liability  of  the  drawer  of  a  check  is 
the  same  as  that  of  a  drawer  of  a  bill. 

455.  SECTION  189.— [WHEN  CHECK  OP- 
ERATES AS  AN  ASSIGNMENT.]  A  check  of 
itself  does  not  operate  as  an  assignment  of  any  part 
of  the  funds  to  the  credit  of  the  drawer  with  the 
bank,  and  the  bank  is  not  liable  to  the  holder,  unless 
and  until  it  accepts  or  certifies  the  check. 

456.  A  CHECK  IS  NOT  AN  ASSIGNMENT 
OF  PART  OF  THE  ACCOUNT  ON  WHICH  IT 
IS  DRAWN.— -Before  the  enactment  of  the  Nego- 
tiable Instruments  Law,  there  was,  in  a  number 
though  not  in  most  of  the  States,  another  important 
difference  between  a  check  and  other  bills  of  ex- 
change.   It  was  the  law  of  this  minority  of  the 


242        NEGOTIABLE  INSTRUMENTS 

States  that  a  check  made  the  payee  or  holder  the 
assignee  of  a  sufficient  portion  of  the  drawer's  ac- 
count to  pay  the  check,  though  an  ordinary  bill  of 
exchange  did  not  have  this  effect.  Under  this  rule 
the  bank  on  being  notified  of  the  check  was  liable 
directly  to  the  holder  to  pay  it,  if  the  drawer's  ac- 
count was  sufficient  to  meet  it.  The  holder  of  the 
check  as  soon  as  he  acquired  it  was  regarded  as  be- 
coming owner  of  so  much  of  the  drawer's  account 
as  equalled  the  face  of  the  check.  This  rule  does 
not  exist  now  in  any  State  which  has  adopted  the 
Negotiable  Instruments  Law,  for  by  Section  189  of 
that  statute,  it  is  provided  that  a  check  does  not 
operate  as  an  assignment;  and  the  statute  also  in 
Section  127  enacts  the  rule  prevailing  generally  at 
Common  Law  that  a  bill  of  exchange  too  does  not 
operate  as  an  assignment. 

457.  A  CHECK  IS  NOT  AN  ASSIGNMENT 
EVEN  WHEN  CERTIFIED.— The  last  clause 
of  this  section  is  somewhat  misleading  since 
it  implies  that  after  acceptance  or  certifica- 
tion, the  check  does  operate  as  an  assignment. 
The  words  of  the  section  itself  are  not  perfectly 
clear.  They  may  mean  only  that  the  bank  is  not 
liable  unless  and  until  it  accepts  and  certifies,  which 
is  certainly  true,  but  they  may  imply  also  that  a 
check  operates  as  an  assignment  when  the  bank 
certifies.  If  the  comma  after  the  word  holder  were 
omitted,  the  former  meaning  would  clearly  be  the 
right  one ;  but  in  view  of  the  heading  of  the  section 


NEGOTIABLE  INSTRUMENTS        243 

it  is  probable  that  the  latter  meaning  was  intended. 
Nevertheless,  the  holder  of  a  certified  check  is  not 
an  assignee.  He  has  a  direct  right  against  the  bank. 
If  he  were  merely  an  assignee  his  claim  would  be 
subject  to  any  defence  which  was  good  against  the 
drawer. 


CHAPTER  V 


Title  IV  of  the  Negotiable  Instruments  Law 


GENERAL  PROVISIONS 


Article  I 


458.  SECTION  190.— [SHORT  TITLE.]  This 
act  may  be  cited  as  the  Uniform  Negotiable  Instru- 
ments Act. 

459.  SECTION  191.— [DEFINITIONS  AND 
MEANING  OF  TERMS.]  In  this  act,  unless  the 
context  otherwise  requires — 

"Acceptance"  means  an  acceptance  completed  by 
delivery  or  notification. 

"Action"  includes  counter-claim  and  set-off. 

"Bank"  includes  any  person  or  association  of  per- 
sons carrying  on  the  business  of  banking,  whether 
incorporated  or  not. 

"Bearer"  means  the  person  in  possession  of  a  bill 
or  note  which  is  payable  to  bearer. 

"Bill"  means  bill  of  exchange,  and  "note"  means 
negotiable  promissory  note. 

"Delivery"  means  transfer  of  possession,  actual 
or  constructive,  from  one  person  to  another. 

"Holder"  means  the  payee  or  indorsee  of  a  bill  or 
note,  who  is  in  possession  of  it,  or  the  bearer  thereof. 

"Indorsement"  means  an  indorsement  completed 
by  delivery. 

"Instrument"  means  negotiable  instrument. 

"Issue"  means  the  first  delivery  of  the  instrument, 

244 


NEGOTIABLE  INSTRUMENTS        245 

complete  in  form,  to  a  person  who  takes  it  as  a 
holder. 

"Person"  includes  a  body  of  persons,  whether  in- 
corporated or  not. 

"Value"  means  valuable  consideration. 

"Written"  includes  printed,  and  "writing"  in- 
cludes print. 

460.  SECTION  192.— [PERSON  PRIMAR- 
ILY LIABLE  ON  INSTRUMENT.]  The  person 
"primarily"  liable  on  an  instrument  is  the  person 
who  by  the  terms  of  the  instrument  is  absolutely 
required  to  pay  the  same.  All  other  parties  are  "sec- 
ondarily" liable. 

461.  SECTION  193.— [REASONABLE  TIME, 
WHAT  CONSTITUTES.]  In  determining  what 
is  a  "reasonable  time"  or  an  "unreasonable  time," 
regard  is  to  be  had  to  the  nature  of  the  instrument, 
the  usage  of  trade  or  business  (if  any)  with  respect 
to  such  instruments,  and  the  facts  of  the  particular 
case. 

462.  SECTION  194.— [TIME,  HOW  COM- 
PUTED; WHEN  LAST  DAY  FALLS  ON 
HOLIDAY.]  Where  the  day,  or  the  last  day,  for 
doing  any  act  herein  required  or  permitted  to  be 
done  falls  on  Sunday  or  on  a  holiday,  the  act  may 
be  done  on  the  next  succeeding  secular  or  business 
day. 

463.  SECTION  195.— [APPLICATION  OF 
ACT.]  The  provisions  of  this  act  do  not  apply  to 
negotiable  instruments  made  and  delivered  prior  to 
the  [taking  effect]  hereof. 

464.  SECTION  196.— [CASES  NOT  PRO- 
VIDED FOR  IN  ACT.]    In  any  case  not  provided 


246        NEGOTIABLE  INSTRUMENTS 

for  in  this  act  the  rules  of  [law  and  equity  includ- 
ing] the  law  merchant  shall  govern. 

465.  SECTION  197.— [REPEALS.]  All  acts 
and  parts  of  acts  inconsistent  with  this  act  are  here- 
by repealed. 

466.  SECTION  198.— [TIME  WHEN  ACT 
TAKES  EFFECT.]  This  [act]  shall  take  effect 
on 


CHAPTER  VI 


Supplementary  Topics 

467.     STATUTE    OF    LIMITATIONS.— The 

statute  of  limitations  is  always  an  important  matter 
in  regard  to  negotiable  instruments  and  all  forms  of 
contracts.  The  common  statute  of  limitations 
governing  simple  contracts  is  six  years  from 
the  time  when  performance  is  first  due.  In 
some  States  it  has  been  shortened  to  five  or  even 
three,  but  six  is  the  most  common  period.  A  sealed 
contract,  the  evidences  of  indebtedness  of  a  bank, 
or  a  judgment  in  many  States,  continues  in 
force  for  twenty  years,  and  so  does  a  witnessed 
promissory  note,  but  it  is  necessary  to  examine  the 
statutes  of  each  State  on  this  matter.  The  statute  is 
started  afresh  by  any  signed  written  promise  to  pay 
a  debt,  or  by  any  signed  written  unqualified  admis- 
sion of  the  debt,  or  by  any  part  payment  of  princi- 
pal or  interest,  whether  made  before  or  after  the 
statute  has  originally  run.  For  instance,  if  money 
is  due  in  1902,  and  the  debtor  makes  a  payment  in 
1904,  the  debt  will  not  be  outlawed  till  1910;  or  if 
no  payment  had  been  made  and  the  debtor,  when 
asked  to  pay  the  debt  in  1909,  after  it  was  barred, 
should  write,  "I  intend  to  pay  that  debt,"  or  should 
even  write  no  more  than,  "Of  course  that  debt  is  due 
and  I  am  sorry  I  have  not  paid  it,"  that  would  start 
the  statute  afresh,  and  the  claim  would  not  be  out- 

247 


248        NEGOTIABLE  INSTRUMENTS 

la  wed  until  1915.  On  a  running  account  with  mu- 
tual debts  and  credits  the  statute  does  not  bar  the 
account  until  six  years  after  the  date  of  the  last  item 
of  the  account.  A  trust  does  not  become  outlawed 
so  long  as  the  trustee  continues  to  hold  for  the  bene- 
ficiary, but  if  the  trust  were  repudiated  the  statute 
would  then  begin  to  run  at  once,  because  it  would 
be  clear  that  the  trustee  no  longer  held  the  trust 
property  as  such.  A  bank  deposit  is  not  exactly  a 
trust,  but  it  is  a  liability  to  pay  only  on  demand,  and 
therefore  the  statute  does  not  run  except  when  and 
after  a  demand  is  made.  If  a  cause  of  action  is 
fraudulently  concealed,  the  statute  does  not  run 
while  the  concealment  continues.  If  the  debtor  is 
out  of  the  State  the  statute  does  not  run  during  the 
period  while  he  is  out  of  the  State, — that  time  is 
deducted;  but  there  is  generally  this  qualification, 
that  if  the  debt  becomes  completely  barred  in  some 
other  State,  while  the  creditor  resided  therein,  it  is 
thereafter  barred  in  the  first  State. 

468.  BANKER'S  LIEN  AND  RIGHT  OF  SET- 
OFF.— A  word  may  be  said  in  regard  to  the  bank's 
right  of  lien  and  set-off.  A  bank  has  a  lien  on  its 
customer's  securities  in  its  hands  for  any  balance 
due  it,  unless  the  securities  are  held  under  some  in- 
consistent arrangement.  If,  for  instance  ,  by  the 
terms  of  a  collateral  note,  collaterals  are  held  merely 
to  secure  that  note,  the  arrangement  is  inconsistent 
with  their  being  held  as  security  for  a  general  bal- 
ance.   It  is  a  good  plan  to  have  it  provided  in  a  col- 


NEGOTIABLE  INSTRUMENTS        249 

lateral  note  that  the  collateral  may  be  applied  to  all 
indebtedness  due  to  the  bank.  That  provision  may- 
destroy  the  negotiability  of  the  note,  but  frequently 
it  is  of  more  importance  to  a  bank  to  have  the  bene- 
fit of  all  the  collateral  for  all  indebtedness  than  to 
have  the  note  negotiable.  The  depositor's  account 
is  not  tangible  property  and  is  therefore  not  some- 
thing in  regard  to  v^^hich  one  may  speak  of  as  a  lien. 
It  is  legally  merely  a  debt  due  from  the  bank  to  its 
depositor;  but  a  right  to  set  off  its  ov^m  claims 
against  this  debt  is  in  effect  the  equivalent  of  a  lien. 
May  a  bank  set  off  against  a  depositor's  drav^^ing 
account  a  note  made  by  him  due  to  the  bank?  Yes, 
it  may  if  the  note  is  due;  if  the  note  is  not  due,  it 
cannot  set  it  off.  As  a  general  rule,  that  would  be 
agreed  both  by  bank  men  and  lawyers,  but  would  it 
not  make  a  difference  if  the  depositor  was  insol- 
vent? It  is,  indeed,  only  in  that  case  that  a  bank 
would  claim  to  be  entitled  to  set  off  against  a  gen- 
eral account  an  unmatured  note  of  a  depositor.  It 
has  been  held  in  Massachusetts  and  some  other 
States  that  the  bank  has  no  right  to  set  off  an  un- 
matured note  against  the  depositor's  account,  even 
if  the  depositor  is  insolvent.  In  some  States  the 
law  is  otherwise;  and  the  National  Bankruptcy 
Law  in  effect  allows  such  a  set-off  in  case  of  bank- 
ruptcy, for  the  National  Bankruptcy  Law  provides 
that  any  provable  claim  may  be  set  off  by  the  credi- 
tor against  a  claim  due  from  him  to  the  bankrupt 
estate.    Now  the  bankrupt  depositor's  general  ac- 


250        NEGOTIABLE  INSTRUMENTS 

count  would  be  a  debt  due  from  the  bank,  and  the 
note  would  be  a  provable  claim,  even  though  not 
yet  matured,  so  the  bank  could  set  off  the  unma- 
tured note  against  the  account.  In  States  like  Mas- 
sachusetts, therefore,  where  the  State  courts  deny 
ithe  right  to  set  off  an  unmatured  note  of  an 
insolvent,  it  is  better  for  the  bank  when  it 
has  a  general  deposit  account  with  the  bal- 
ance in  favor  of  the  insolvent,  to  have  the  insol- 
vent's estate  settled  under  the  bankruptcy  law  than 
under  a  general  assignment;  for  under  a  general 
assignment  the  bank  would  have  to  pay  the  draw- 
er's account  in  full  and  then  take  a  dividend  on  the 
unmatured  note,  whereas  in  bankruptcy  one  could 
be  set  off  against  the  other.  Sometimes  a  question 
in  regard  to  a  banker's  lien  or  right  of  set-off  arises 
in  regard  to  partnerships.  Suppose  a  partnership 
debt  due  to  a  bank  which  has  also  in  its  hands  se- 
curities belonging  to  an  individual  partner.  May 
the  bank  apply  the  partner's  securities  to  that  part- 
nership debt,  which  we  are  assuming  is  matured? 
We  should  say  yes,  for  each  partner  in  a  partner- 
ship owes  a  partnership  debt,  and  his  individual 
property  is  subject  to  seizure.  But  suppose  the 
partner  individually  owed  the  bank  a  matured  note; 
then  the  bank  could  not  apply  in  payment  securities 
belonging  to  the  firm,  because  a  firm  does  not  owe 
the  individual  partner's  debt.  For  the  assertion  of 
a  right  of  lien  or  set-off  the  two  claims  must  be  in 
the  same  right ;  that  is,  property  belonging  to  A  as 


NEGOTIABLE  INSTRUMENTS        251 

a  trustee  cannot  be  held  to  satisfy  a  claim  against 
him  personally,  or  if  money  is  received  for  a  speci- 
fied purpose  it  cannot  be  applied  to  satisfy  a  per- 
sonal liability. 

469.  COLLECTIONS  AND  TRANSITS.— A 
large  part  of  the  business  of  a  bank  consists  in  col- 
lecting negotiable  paper  for  others.  The  duties  re- 
quired by  this  work  can  be  fully  understood  only  by 
one  who  has  some  understanding  both  of  the  law  of 
negotiable  paper  and  of  the  law  of  agency.  A  col- 
lecting bank  is  an  agent,  and  the  nature  of  its  duties 
require  it  to  employ  sub-agents.  Generally  the 
authority  of  an  agent  can  not  be  delegated,  but  the 
collection  of  negotiable  paper  necessarily  requires 
the  employment  of  sub-agents  when  the  paper  is 
payable  in  another  city  than  that  in  which  the  bank 
with  which  the  paper  was  originally  deposited  for 
collection  does  business  and  therefore  such  employ- 
ment is  justified.  The  duty  of  the  bank  in  a  general 
way  may  be  summed  up  in  a  single  sentence.  It 
must  use  due  diligence  in  seeing  that  paper  is  either 
paid  or  the  parties  to  it  charged  with  liability.  This 
sentence,  however,  involves  a  good  many  things.  In 
the  first  place  the  bank  of  deposit  must  select  a 
reasonable  means  of  collection.  Frequently  it  is 
the  custom  of  banks  instead  of  sending  paper  to  be 
collected  directly  to  the  city  where  it  is  payable,  to 
send  it  by  way  of  intermediate  points.  How  far  the 
bank  of  deposit  is  justified  in  doing  this,  and  espe- 
cially how  far  it  is  justified  for  its  own  convenience 


252        NEGOTIABLE  INSTRUMENTS 

or  profit  in  sending  paper  by  indirect  routing  to  the 
point  of  destination,  is  a  matter  which  has  not  been 
much  before  the  courts.  The  contract  of  the  bank 
of  deposit  with  its  customer  undoubtedly  includes, 
as  one  of  its  terms,  that  the  collection  shall  be  made 
according  to  reasonable  and  usual  banking  customs. 
This  would  justify  any  routing  which  did  not  obvi- 
ously increase  the  normal  danger  of  loss.  Where 
paper  is  payable  on  time,  the  presentment  at  the 
place  of  payment  must  be  on  a  fixed  day.  Any  rout- 
ing which  delayed  presentment  beyond  that  day 
when  by  another  mode  presentment  might  have 
been  made  on  time,  would  subject  the  bank  to  lia- 
bility. Where  the  paper  is  payable  on  demand,  the 
presentment  must  be  made  in  a  reasonable  time, 
and  the  bank  of  deposit  must  not  use  a  means  of 
routing  which  will  delay  the  arrival  of  the  paper  at 
the  place  of  payment  beyond  a  reasonable  time. 
Further  than  this,  it  would  not  ordinarily  be  liable. 
A  bank  with  which  paper  is  deposited  for  collec- 
tion will  not  generally  be  liable  if  it  waits  until  the 
extreme  limit  of  time  allowed  by  law  for  present- 
ment, even  though  as  matters  turn  out  payment 
would  have  been  secured  by  immediate  presentment 
and  was  lost  by  the  slight  delay  which  the  bank 
made.  In  special  cases,  however,  this  will  not  be 
true.  The  bank  must  observe  instructions  given  to 
it  by  its  customers,  and  these  instructions  may  in- 
clude a  degree  of  diligence  beyond  that  which  the 
law  would  otherwise  require.  Moreover,  if  the  bank 


NEGOTIABLE  INSTRUMENTS        253 

itself  should  get  information  indicating  that  loss 
would  probably  occur  if  presentment  was  not  made 
with  more  than  ordinary  diligence,  exceptional 
promptness  would  be  required. 

Paper  endorsed  lor  collection  still  remains  equit- 
ably at  least  the  property  of  the  depositor  until  it  is 
ultimately  collected.  Therefore  if  a  bank  fails,  hav- 
ing in  its  possession  paper  endorsed  for  collection, 
this  will  not  form  part  of  the  general  assets  of  cred- 
itors, but  will  be  returned  to  the  depositor.  When 
collection  has  actually  been  made,  however,  the 
bank  is  generally  authorized  to  credit  the  proceeds 
as  a  mere  debt.  If  an  agent  of  the  bank  of  deposit 
should  fail  without  remitting  the  proceeds  to  the 
bank  of  deposit,  the  decisions  of  a  few  States  compel 
the  bank  of  deposit  to  make  good  the  loss;  that  is, 
it  is  held  liable  absolutely  for  the  default  of  its 
agent,  the  collecting  bank;  but  the  courts  of  most 
States  do  not  hold  the  bank  of  deposit  liable  unless 
it  was  negligent  in  its  selection  of  a  correspondent. 

Where  on  presentment,  paper  deposited  for  col- 
lection is  dishonored,  it  is  the  duty  of  the  bank  to 
charge  parties  secondarily  liable;  and  failure  to  do 
so  will  make  it  liable  itself  to  its  customer.  It  will 
not  be  liable,  however,  to  other  parties  to  the  instru- 
ment. Thus  if  a  bank  failed  to  charge  the  first  in- 
dorser  of  negotiable  paper  and  the  second  indorser 
was  forced  to  pay,  the  latter  has  no  right  of  action 
against  the  bank  for  failing  to  perform  its  duty. 


254 


NEGOTIABLE  INSTRUMENTS 

CHAPTER  VII 


Table  of  Corresponding  Sections  of  the 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.L. 

Ala. 

Ariz. 

Col. 

Conn. 

D.C. 

Fla. 

Ida. 

III. 

Kan. 

Ky. 

M. 

Matt. 

MIeh 

1 

4958 

3304 

4464 

4171 

1305 

2935 

3458 

1 

4540 

1897 

20 

18 

3 

2 

4959 

3305 

4465 

4172 

1306 

2936 

3459 

2 

4541 

1898 

21 

19 

4 

3 

4960 

3306 

4466 

4173 

1307 

2937 

3460 

3 

4542 

1899 

22 

20 

5 

4 

4961 

3307 

4467 

4171 

1308 

;  293  8 
^  2  9  3  9 

3461 

4 

4543 

1900 

23 

21 

6 

5 

4962 

3308 

4468 

4175 

1309 

2939 

3462 

5 

4541 

1901 

24 

22 

7 

6 

4963 

3309 

4469 

4176 

1310 

2940 

3463 

6 

4545 

1902 

25 

23 

8 

7 

4965 

3310 

4470 

4177 

1312 

2941 

3464 

7 

4546 

1903 

26 

24 

9 

8 

4965 

3311 

4471 

4178 

1312 

2942 

3465 

8 

4547 

1904 

27 

25 

10 

9 

4966 

3312 

4472 

4179 

1313 

2943 

3466 

9 

4548 

1905 

28 

26 

11 

10 

4967 

3313 

4473 

4180 

1314 

2944 

3467 

10 

4549 

1906 

29 

27 

12 

11 

4968 

3314 

4474 

4181 

1315 

2945 

3468 

11 

4550 

1907 

30 

28 

13 

12 

4969 

3315 

4475 

4182 

1316 

2946 

3469 

12 

4551 

1908 

31 

29 

14 

13 

4970 

3316 

4476 

4183 

1317 

2947 

3470 

13 

4552 

1909 

32 

30 

15 

14 

4971 

3317 

4477 

4184 

1318 

2948 

3471 

14 

4553 

1910 

33 

31 

16 

15 

4972 

3318 

4478 

4185 

1319 

2949 

3472 

15 

4554 

1911 

34 

32 

17 

16 

4973 

3319 

4479 

4186 

1320 

2950 

3473 

16 

4555 

1912 

35 

33 

18 

17 

4974 

3320 

4480 

4187 

1321 

2951 

3474 

17 

4556 

1913 

36 

34 

19 

18 

4975 

3.^21 

4481 

4188 

1322 

2952 

3475 

18 

4557 

1914 

37 

35 

20 

19 

4976 

3322 

4482 

4189 

1323 

2953 

3476 

19 

4558 

1915 

38 

36 

21 

20 

4977 

3323 

4483 

4190 

1324 

2954 

3477 

20 

4559 

1916 

39 

37 

22 

21 

4978 

3324 

4484 

4191 

1325 

2955 

3478 

21 

4560 

1917 

40 

38 

23 

22 

4979 

3325 

4485 

4192 

1326 

2956 

3479 

22 

4561 

1918 

41 

39 

24 

23 

4980 

3325 

4486 

4193 

1327 

2957 

3480 

23 

4562 

1919 

42 

40 

25 

24 

4981 

3327 

4487 

4194 

1328 

2958 

3481 

24 

4563 

1884 

43 

41 

26 

25 

4982 

3328 

4488 

4195 

1329 

2959 

3482 

25 

4564 

1885 

44 

42 

27 

26 

4982 

3329 

4489 

4196 

1330 

2960 

3483 

26 

4565 

1886 

45 

43 

28 

27 

4982 

33.^0 

4490 

4197 

1331 

2961 

3484 

27 

4566 

1887 

46 

44 

29 

28 

4983 

3331 

4491 

4198 

1332 

2962 

3485 

28 

4567 

1888 

47 

45 

30 

29 

4984 

3332 

4492 

4199 

1333 

2963 

3486 

29 

4568 

1889 

48 

46 

31 

30 

4985 

3333 

4493 

4200 

1334 

2964 

3487 

30 

4569 

1939 

49 

47 

32 

31 

4986 

3334 

4494 

4201 

1335 

2965 

3488 

31 

4570 

1940 

50 

48 

33 

32 

4987 

3335 

4495 

4202 

1336 

2966 

3489 

32 

4571 

1941 

51 

49 

34 

33 

4988 

3336 

4496 

4203 

1337 

2967 

3490 

33 

4572 

1942 

52 

50 

35 

34 

4989 

3337 

4497 

4204 

1338 

2968 

3491 

34 

4573 

1943 

53 

51 

36 

35 

4990 

3338 

4498 

4205 

1339 

2969 

3492 

35 

4574 

1944 

54 

52 

37 

NEGOTIABLE  INSTRUMENTS 
CHAPTER  VII 


255 


Law  in  the  Various  States  and  Territories 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

Hon. 

N«b. 

N.H. 

N.  Y. 

N.  C, 

N.  D. 

Okl. 

Ohio 

Ore, 

R.I. 

S.  D. 

lenn 

Utah 

wis. 

5849 

1 

1 

20 

2151 

6303 

1 

3171 

4403 

7 

1 

1 

1553 

1675-1 

5850 

2 

2 

21 

2152 

6304 

2 

3171a 

4404 

8 

2 

2 

1554 

1675-2 

5851 

3 

3 

22 

2153 

6305 

3 

3171b 

4405 

9 

3 

3 

1555 

1675-3 

5852 

4 

4 

23 

2156 

6306 

4 

3171c 

4406 

10 

4 

4 

1556 

1675^ 

5853 

5 

5 

24 

2154 

6307 

5 

3171d 

4407 

11 

5 

5 

1557 

1675-5 

5854 

6 

6 

25 

2155 

6308 

6 

3171e 

4408 

12 

6 

6 

1558 

1675-6 

5855 

7 

7 

26 

2157 

6309 

7 

3171  f 

4409 

13 

7 

7 

1559 

1675-7 

5856 

8 

8 

27 

2158 

6310 

8 

3171g 

4410 

14 

8 

8 

1560 

1675-8 

5857 

9 

9 

28 

2159 

6311 

9 

3171h 

4411 

15 

9 

9 

1561 

1675-9 

5858 

10 

10 

29 

2160 

6312 

10 

3171  i 

4412 

16 

10 

10 

1562 

1675-10 

5859 

11 

11 

30 

2161 

6313 

11 

3171  j 

4413 

17 

11 

11 

1563 

1675-11 

5860 

12 

12 

31 

2162 

6314 

12 

3171k 

4414 

18 

12 

12 

1564 

1675-12 

5861 

13 

13 

32 

2163 

6315 

13 

31711 

4415 

19 

13 

13 

1565 

1675-13 

5862 

14 

14 

33 

2164 

6316 

14 

3171m 

4416 

20 

14 

14 

1566 

1675-14 

5863 

15 

15 

34 

2165 

6317 

15 

3171n 

4417 

21 

15 

15 

1567 

1675-15 

5864 

16 

16 

35 

2166 

6318 

16 

31710 

4418 

22 

16 

16 

1568 

1675-16 

5865 

17 

17 

36 

2341 

6319 

17 

3171p 

4419 

23 

17 

17 

1569 

1675-17 

5866 

18 

18 

37 

2167 

6320 

18 

3171q 

4420 

24 

18 

18 

1570 

1675-18 

5867 

19 

19 

38 

2168 

6321 

19 

3171r 

4421 

25 

19 

19 

1571 

1675-19 

5868 

20 

20 

39 

2169 

6322 

20 

3171s 

4422 

26 

20 

20 

1572 

1675-20 

5869 

21 

21 

40 

2170 

6323 

21 

3171 1 

4423 

27 

21 

21 

1573 

1675-21 

5870 

22 

22 

41 

2180 

6324 

22 

3171U 

4424 

28 

22 

22 

1574 

1675-22 

5871 

23 

23 

42 

2171 

6325 

23 

3171V 

4425 

29 

23 

23 

1575 

1675-23 

5872 

24 

24 

50 

2172 

6326 

24 

3171W 

4426 

30 

24 

24 

1576 

1675-50 

5873 

25 

25 

51 

2173 

6327 

25 

3171X 

4427 

31 

25 

25 

1577 

1675-51 

5874 

26 

26 

52 

2174 

6328 

26 

3171y 

4428 

32 

26 

26 

1578 

1675-52 

5875 

27 

27 

53 

2175 

6329 

27 

3171z 

4429 

33 

27 

27 

1579 

1675-53 

5876 

28 

28 

54 

2176 

6330 

28 

3172 

4430 

34 

28 

28 

1580 

1675-54 

5877 

29 

29 

55 

2177 

6331 

29 

3172a 

4431 

35 

29 

29 

1581 

1675-55 

5878 

30 

30 

60 

2178 

6332 

30 

3172b 

4432 

36 

30 

35 

1582 

1676 

5879 

31 

31 

61 

2179 

6333 

31 

3172c 

4433 

37 

31 

31 

1583 

1676-1 

5880 

32 

32 

62 

2181 

6334 

32 

3172d 

4434 

38 

32 

32 

1584 

1676-2 

5881 

33 

33 

63 

2182 

6335 

33 

3172e 

4435 

39 

33 

33 

1585 

1676-3 

5882 

34 

34 

64 

2183 

6336 

34 

3172  f 

4436 

40 

34 

34 

1586 

1676-4 

5883  35  35 

65 

2184  6337 

35 

3172g 

4437 

41 

35 

35 

1587 

1676-5 

256        NEGOTIABLE  INSTRUMENTS 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

18 

H.I.L. 

Ala. 

Ariz. 

Col, 

Conn. 

D.C. 

Fla. 

Ida. 

III. 

Kan. 

Ky. 

Md. 

Mas. 

Mich 

36 

4991 

3339 

4499 

4206 

1340 

2970 

3493 

36 

4575 

1945 

55 

53 

38 

37 

4992 

3340 

4500 

4207 

1341 

2971 

3494 

37 

4576 

1946 

56 

54 

39 

38 

4993 

3341 

4501 

4208 

1342 

2972 

3495 

38 

4577 

1947 

57 

55 

40 

39 

4994 

3342 

4502 

4209 

1343 

2973 

3496 

39 

4578 

1948 

58 

56 

41 

40 

4995 

3343 

4503 

4210 

1344 

2974 

3497 

40 

4579 

1949 

59 

57 

42 

41 

4996 

3344 

4504 

4211 

1345 

2975 

3498 

41 

4580 

1950 

60 

58 

43 

42 

1997 

3345 

4505 

4212 

1346 

2976 

3499 

42 

4581 

1951 

61 

59 

44 

43 

4998 

3346 

4506 

4213 

1347 

2977 

3500 

43 

4582 

1952 

62 

60 

45 

44 

4999 

3347 

4507 

4214 

1348 

2978 

?501 

44 

4583 

1953 

63 

61 

46 

45 

5000 

3348 

4508 

4215 

1349 

2979 

3502 

45 

4584 

1954 

64 

62 

47 

46 

5001 

3349 

4509 

4216 

1350 

2979 

3503 

46 

4585 

1955 

65 

63 

48 

47 

5002 

3350 

4510 

4217 

1351 

2980 

3504 

47 

4586 

1956 

66 

64 

49 

48 

5003 

3351 

4511 

4218 

1352 

2981 

3505 

48 

4587 

1957 

67 

65 

50 

49 

5004 

3352 

4512 

4219 

1353 

2982 

3506 

49 

4588 

1958 

68 

66 

51 

50 

5005 

3353 

4513 

4220 

1354 

2983 

3507 

50 

4589 

1958 

69 

67 

52 

51 

5006 

3354 

4514 

4221 

1355 

2984 

3508 

51 

4590 

1920 

70 

68 

53 

52 

5007 

3255 

4515 

4222 

1356 

2985 

3509 

52 

4591 

1921 

71 

69 

54 

53 

5008 

3356 

4516 

4223 

1357 

2986 

3510 

53 

4592 

1922 

72 

70 

55 

54 

5009 

3357 

4517 

4224 

1358 

2987 

3511 

54 

4593 

1923 

73 

71 

56 

55 

5019 

3358 

4518 

4225 

1359 

2988 

3512 

55 

4594 

1924 

74 

72 

57 

56 

5011 

3359 

4519 

4226 

1360 

2989 

3513 

56 

4595 

1925 

75 

73 

58 

57 

5012 

3360 

4520 

4427 

1361 

2990 

3514 

57 

4596 

1926 

76 

74 

59 

58 

5013 

3361 

4521 

4228 

1362 

2991 

3515 

58 

4597 

1927 

77 

75 

60 

59 

5014 

3362 

4522 

4229 

1363 

2992 

3516 

59 

4598 

1928 

78 

76 

61 

60 

5015 

3363 

4523 

4230 

1364 

2993 

3517 

60 

4599 

1929 

79 

77 

62 

61 

5016 

3364 

4524 

4231 

1365 

2994 

3518 

61 

4600 

1930 

80 

78 

63 

62 

5017 

3365 

4525 

4232 

1366 

2995 

3519 

62 

4601 

1931 

81 

79 

64 

63 

5018 

3366 

4526 

4233 

1367 

2996 

3520 

63 

4602 

1932 

82 

80 

65 

64 

5019 

3367 

4527 

4234 

1368 

2947 

3521 

64 

4603 

1933 

83 

81 

66 

65 

5020 

3368 

4528 

4235 

1369 

2918 

3522 

65 

4604 

1934 

84 

82 

67 

66 

5021 

3369 

4529 

4236 

1370 

2999 

3523 

66 

4605 

1935 

85 

83 

68 

67 

5022 

3370 

4530 

4237 

1371 

3000 

3524 

67 

4606 

1936 

86 

84 

69 

68 

5023 

3371 

4531 

4238 

1372 

3001 

3525 

68 

4607 

1937 

87 

85 

70 

69 

5024 

3372 

4532 

4239 

1373 

3002 

3526 

69 

4608 

1938 

88 

86 

71 

70 

5025 

3373 

4533 

4240 

1374 

3003 

3527 

70 

4609 

1990 

89 

87 

72 

71 

5026 

3374 

4534 

4211 

1375 

3004 

3528 

71 

4610 

1991 

90 

88 

73 

72 

5027 

3375 

4535 

4242 

1376 

3005 

4529 

72 

4611 

1992 

91 

89 

74 

73 

5028 

3376 

4536 

4243 

1377 

3006 

3530 

73 

4612 

1993 

92 

90 

75 

74 

5029 

3377 

4537 

4244 

1378 

3007 

3531 

74 

4613 

1994 

93 

91 

76 

75 

5030 

3378 

4538 

4245 

1379 

3008 

3532 

75 

4614 

1995 

94 

92 

77 

NEGOTIABLE  INSTRUMENTS        257 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

■on. 

Neb. 

N.N. 

N.  Y. 

N.  C. 

N.  D. 

Okl. 

Ohio 

Ore. 

R.I. 

$.D. 

To  08 

Utah 

wis. 

5884 

36 

36 

66 

2185 

6338 

36 

3172h 

4438 

42 

36 

36 

1588 

1676-6 

5885 

37 

37 

67 

2186 

6339 

37 

31721 

4439 

43 

37 

37 

1589 

1676-7 

5886 

38 

38 

68 

2187 

6340 

38 

3172J 

4440 

44 

38 

38 

1590 

1676-8 

5887 

39 

39 

69 

2188 

6341 

39 

3172k 

4441 

45 

39 

39 

1591 

1676-9 

5888 

40 

40 

70 

2189 

6342 

40 

31721 

4442 

46 

40 

40 

1592 

1676-10 

5889 

41 

41 

71 

2190 

6343 

41 

3172m 

4443 

47 

41 

41 

1593 

1676-11 

5890 

42 

42 

72 

2191 

6344 

42 

2173n 

4444 

48 

42 

42 

1594 

1676-12 

5891 

43 

43 

73 

2192 

6345 

43 

31720 

4445 

49 

43 

43 

1595 

1676-13 

5892 

44 

44 

74 

2193 

6346 

44 

3172p 

4446 

50 

44 

44 

1596 

1676  14 

5893 

45 

45 

75 

2194 

6347 

45 

3172q 

4447 

51 

45 

45 

1597 

1676-15 

5894 

46 

46 

76 

2195 

6348 

46 

3172r 

4448 

52 

46 

46 

1598 

1676-16 

5895 

47 

47 

77 

2196 

6349 

47 

3172s 

4449 

53 

47 

47 

1599 

1676-17 

58% 

48 

48 

78 

2197 

6350 

48 

3172t 

4450 

54 

48 

48 

1600 

1676-18 

5897 

49 

49 

79 

2198 

6351 

49 

3172U 

4451 

55 

49 

49 

1601 

1676-19 

5898 

50 

50 

80 

2199 

6352 

50 

3172V 

4452 

56 

50 

50 

1602 

1676-20 

5899 

51 

51 

90 

2200 

6353 

51 

3172W 

4453 

57 

51 

51 

1603 

1676-21 

5900 

52 

52 

91 

2201 

6354 

52 

3172X 

4454 

58 

52 

52 

1604 

1676-22 

5901 

53 

53 

92 

2202 

6355 

53 

3172y 

4455 

59 

53 

53 

1605 

1676-23 

5902 

54 

54 

93 

2203 

6356 

54 

3172Z 

4456 

60 

54 

54 

1606 

1676-24 

5903 

55 

55 

94 

2204 

6357 

55 

3173 

4457 

61 

55 

55 

1607 

1676-25 

5904 

56 

56 

95 

2205 

6358 

56 

3173a 

4458 

62 

56 

56 

1608 

1676-26 

5905 

57 

57 

96 

2206 

6359 

57 

3173b 

4459 

63 

57 

57 

1609 

1676-27 

5906 

58 

58 

97 

2207 

6360 

57 

3173c 

4460 

64 

58 

58 

1610 

1676-28 

5907 

59 

59 

98 

2208 

6361 

59 

3173d 

4461 

65 

59 

59 

1611 

1676-29 

5908 

60 

60 

110 

2209 

6362 

60 

3173e 

4462 

66 

60 

60 

1612 

1677 

5909 

61 

61 

111 

2210 

6363 

61 

3173f 

4463 

67 

61 

61 

1613 

1677-1 

5910 

62 

62 

112 

2211 

6364 

63 

3173g 

4464 

68 

62 

62 

1614 

1677-2 

5911 

63 

63 

113 

2212 

6365 

63 

3173h 

4465 

69 

63 

63 

1615 

1677-3 

5912 

64 

64 

114 

2213 

6366 

64 

31731 

4466 

70 

64 

64 

1616 

1677-4 

5913 

65 

65 

115 

2214 

6367 

65 

3173J 

4467 

71 

65 

65 

1617 

1677-5 

5914 

66 

66 

116 

2215 

6368 

66 

3173k 

4468 

72 

66 

66 

1618 

1677-6 

5915 

67 

67 

117 

2216 

6369 

67 

3173 1 

4469 

73 

67 

67 

1619 

1677-7 

5916 

68 

68 

118 

2217 

6370 

68 

3173m 

4470 

74 

68 

68 

1620 

1677-8 

5917 

69 

69 

119 

2218 

6.371 

69 

3173n 

4471 

75 

69 

69 

1621 

1677-9 

5918 

70 

70 

130 

2219 

6372 

70 

31730 

4472 

76 

70 

70 

1622 

1678 

5919 

71 

71 

131 

2220 

6373 

71 

3173p 

4473 

77 

71 

71 

1623 

1678-1 

5920 

72 

72 

132 

2221 

6374 

72 

3173q 

4474 

78 

72 

72 

1624 

1678-2 

5921 

73 

73 

133 

2222 

6375 

73 

3173r 

4475 

79 

73 

73 

1625 

1678-3 

5922 

74 

74 

134 

2223 

6376 

74 

3173s 

4476 

80 

74 

74 

1626 

1678-4 

5923 

75 

75 

135 

2224 

6377 

75 

3173t 

4477 

81 

75 

75 

1627 

1678-5 

258        NEGOTIABLE  INSTRUMENTS 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.L. 

Ala. 

Ariz. 

Col. 

Conn, 

D.C. 

Fla. 

Ida. 

III. 

Kin. 

Ky. 

Md. 

Mast. 

Mich 

76 

5931 

3379 

4539 

4246 

1380 

3009 

.3533 

76 

4615 

1996 

95 

93 

78 

11 

5032 

3380 

4540 

4247 

1381 

3010 

3534 

77 

4616 

1997 

96 

94 

79 

78 

5033 

3381 

4541 

4248 

1382 

3011 

3535 

78 

4617 

1998 

97 

95 

80 

79 

5034 

3382 

4542 

4549 

1383 

3012 

3536 

79 

4618 

1999 

98 

96 

81 

80 

5035 

3383 

4543 

4250 

1384 

3012 

3537 

80 

4619 

2000 

99 

97 

82 

81 

5036 

3384 

4544 

4251 

1385 

3013 

3538 

81 

4620 

2001 

100 

98 

83 

82 

5037 

3385 

4545 

4252 

1386 

3014 

3539 

82 

4621 

2002 

101 

99 

84 

83 

5038 

3386 

4546 

4253 

1387 

3015 

3540 

83 

4622 

2003 

102 

100 

85 

84 

5038 

3387 

4547 

4254 

1388 

3016 

3541 

84 

4623 

2004 

103 

101 

86 

85 

5039 

3388 

4548 

4255 

1389 

3017 

3542 

85 

4624 

2005 

104 

102 

87 

86 

5040 

3389 

4549 

4256 

1390 

3017 

3543 

86 

4625 

2006 

105 

103 

88 

87 

5041 

3390 

4550 

4257 

1391 

3018 

3544 

4626 

2007 

106 

104 

89 

88 

5042 

3391 

4551 

4258 

1392 

3019 

3545 

87 

4627 

2008 

107 

105 

90 

89 

5043 

3392 

4552 

4259 

1393 

3020 

3546 

88 

4628 

1960 

108 

106 

91 

90 

5044 

3393 

4553 

4260 

1394 

3021 

3547 

89 

4629 

1961 

109 

107 

92 

91 

5045 

3394 

4554 

4261 

1395 

3022 

3548 

90 

4630 

1962 

110 

108 

93 

92 

5046 

3395 

4555 

4262 

1396 

3023 

3549 

91 

4631 

1963 

111 

109 

94 

93 

5047 

3396 

4556 

4263 

1397 

3024 

3550 

92 

4632 

1964 

112 

110 

95 

94 

5047 

3397 

4557 

4264 

1398 

3025 

3551 

93 

4633 

1965 

113 

111 

96 

95 

5048 

3398 

4558 

4265 

1399 

3026 

3552 

94 

4634 

1966 

114 

112 

97 

96 

5048 

3399 

4559 

4266 

1400 

3027 

3553 

95 

4635 

1967 

115 

113 

98 

97 

5049 

3400 

4560 

4267 

1401 

3027 

3554 

96 

4636 

1968 

116 

114 

99 

98 

5050 

3401 

4561 

4268 

1402 

3028 

3555 

97 

4037 

1969 

117 

115 

100 

99 

5051 

3402 

4562 

4269 

1403 

3029 

3556 

98 

4638 

1970 

118 

116 

101 

100 

5052 

3403 

4563 

4270 

1404 

3029 

3557 

99 

4639 

1971 

119 

117 

102 

101 

5053 

3404 

4564 

4271 

1405 

3030 

3558 

100 

4640 

1972 

120 

118 

103 

102 

5054 

3405 

4565 

4272 

1406 

3031 

3559 

101 

4641 

1973  121 

119 

104 

103 

5055 

3406 

4566 

4273 

1407 

3031 

3560 

102 

4642 

1974  122 

120 

105 

104 

5056 

3407 

4567 

4274 

1408 

3032 

3561 

103 

4643 

1975 

123 

121 

106 

105 

5057 

3408 

4568 

4275 

1409 

3033 

3562 

104 

4644 

1976 

124 

122 

107 

106 

5056 

3409 

4569 

4276 

1410 

3033 

3563 

105 

4645 

1977 

125 

123 

108 

107 

5058 

3410 

4570 

4277 

1411 

3034 

3564 

106 

4646 

1978 

126 

124 

109 

108 

5059 

3411 

4571 

4278 

1412 

3035 

3565 

107 

4647 

1979 

127 

125 

110 

109 

5060 

3412 

4572 

4279 

1413 

3036 

3566 

108 

4648 

1980 

128 

126 

111 

110 

5060 

3413 

4573 

4280 

1414 

3036 

3567 

109 

4649 

1981 

129 

127 

112 

111 

5060 

3414 

4574 

4281 

1415 

3036 

3568 

110 

4650 

1982 

130 

128 

113 

112 

5061 

3415 

4575 

4282 

1416 

3037 

3569 

111 

4651 

1983  131 

129 

114 

113 

5062 

3416 

4576'  4283 

1417 

3038 

3570 

112 

4652 

1984 

132 

130 

115 

114 

5063 

3417 

4577 1  4284 

1418 

3039 

3571 

113 

4653 

1985 

133 

131 

116 

115  5064 

3418 

4578|  4285 

1419 

3039 

3572 

114 

4654 

1986 

134 

132  117 

NEGOTIABLE  INSTRUMENTS        259 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

2425 

26 

27 

Mod. 

Neb. 

N.  H. 

N.Y. 

N.  C. 

N.  D. 

Okl. 

Ohio 

Ore. 

R.I. 

S.  D. 

Tenn 

Uiah 

Wis. 

5924 

76 

76 

136 

2225 

6378 

76 

3173a 

4478 

82 

76 

76 

1628 

1678-6 

5925 

77 

77  137 

2226 

6379 

77 

3173v 

4479 

83 

77 

77,1629 

1678-7 

5926 

78 

78138 

2227 

6380 

78 

3173w 

4480 

84|  78 

781630 

1678  8 

5927 

79 

79139 

2228 

6381 

79 

3173X 

4481 

85  79 

79  1631 

1678-9 

5928 

80 

80140 

2229 

6382 

80 

3173y 

4482  86 

80 

80  1632 

1678-10 

5929 

81 

81141 

2230 

6383 

81 

3173Z 

4483  87 

81 

81  1633 

1678-11 

5930 

82 

82142  2231 

6384 

82 

3174 

4484!  88 

821  82  1634 

1678-12 

5931 

83 

83143  2232 

6385 

83 

3174a 

4485 

89 

83 

831635 

1678-13 

5932 

84 

84144  2233 

6386 

84 

3174b 

4486 

90 

84 

84  1636 

1678-14 

5933 

85 

85145 

2234 

6387 

85 

3174c 

4487 

91 

85 

85  1637 

1678-15 

5934 

86 

86146 

2236 

6388 

86 

3174d 

4488 

92 

86 

86  1638 

1678-16 

5935 

87|147 

2237 

6389 

87 

3i74e 

4489 

93... 

87  1639 

1678-17 

5936 

"87 

88148 

2238 

6390 

88 

3174f 

4490 

94|  87 

88  1640 

1678-18 

5937 

88 

89160 

2239 

6391 

80 

3174g 

4491 

85 

88 

89  1641 

1678-19 

5938 

89 

90161 

2240 

6392 

90 

3174h 

4492 

96 

89 

90  1642 

1678-20 

5939 

90 

91162 

2241 

6393 

91 

3174i 

4493 

97  90 

91  1643 

1678-21 

5940 

91 

92163 

2242 

6394 

92 

3174J 

4494!  98|  91 

92  1644 

1678-22 

5941 

92 

93164 

2243 

6395 

93 

3174k 

4495  99 

92 

931645 

1678-23 

5942 

93 

94165 

2244 

6396 

94 

31741 

4496  100 

93 

941646 

1678-24 

5943 

94 

95166 

2245 

6397 

95 

3174in 

4497101 

94 

95  1647 

1678-25 

5944 

95 

96167 

2246 

6398 

96 

3174n 

4498102 

95 

96  1648 

1678-26 

5945 

96 

97 1 168 

2247 

6399 

97 

31740 

4499  103 

96 

97  1649 

1678-27 

5946 

97 

98  169 

2248 

6400 

98 

3174p 

4500  104 

97 

9811650 

1678-28 

5947 

98 

99  170 

2249 

6401 

99  3174q 

4501  105 

98 

991651 

1678-29 

5948 

99  100  171 

2250 

6402  1001  3174r 

4502  106 

99  1001652 

1 

1678-30 

5949 

100  101  172 

2251 

6403101  3174s 

4503  107  100  10l!l653 

1678-31 

595011011102173 

2252 

6404  102 

3174t 

4504108  101  102  1654 

1678-32 

5951102  103174 

2253 

6405  103 

3174U 

4505  1091021031655 

1678-33 

5952103104175 

2254 

6406104 

3174V 

45061101031041656 

1678-34 

5953  104  105  176 

2255 

6407  105 

3174W 

45071111041051657 

1678-35 

5954  105  106  177 

2256 

6408  106 

3174X 

4508112105,1061658 

1678-36 

5955  106  107  178 

2257 

6409  107[  3174y 

4509113106  107  1659 

1678-37 

5956107  108179 

2258 

64101081  3174Z 

45101141071081660 

1678-38 

5957  108  109180 

2259 

6411  109 

3175 

4511115108  1091661 

1678-39 

5958109110|181 

2260 

6412  110 

3175a 

4512  116109jll0jl662 

1678-40 

5959!ll0  111182 

2261 

6413111 

3175b 

4513 

117!ll0  111  1663 

1678-41 

5960111112183 

2262 

6414  112 

3175c 

4514 

118111112  1664 

1678-42 

5961 

112113184 

2263 

6415  113 

3175d 

4515 

119112  1131665 

1678-43 

5962 

113|114;185 

2264 

6416114  3175e 

4516 120  113  114  1665X 

1678-44 

5963 

114  H5jl86 

2265 

6417115  3l75f 

4517  121 1141151665x1 

1678-45 

260        NEGOTIABLE  INSTRUMENTS 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

N.I.L. 

All. 

Ariz. 

Col. 

Conn. 

DC. 

Fla. 

Ida. 

III. 

Kan. 

Ky. 

Md. 
135 

Mats. 
133 

Mich. 

116 

5065 

3419 

4579 

4286 

1420 

3039  3573115 

4655 

1987 

118 

117 

5066 

3420 

4580 

4287 

1421 

3040  3574|ll6 

4656 

1988 

136 

134 

119 

118 

5067 

3421 

4581 

4288 

1422 

3041 

35751117 

4657 

1989 

137 

135 

120 

119 

5068 

3422 

4582 

4289 

1423 

3042 

3576118 

4658 

1890 

138 

136 

121 

120 

5069 

3423 

4683 

4290 

1424 

3042 

3577119 

4659 

1891 

139 

137 

122 

121 

5070 

3424 

4584 

4291 

1425 

3043 

3578120 

4660 

1892 

140 

138 

123 

122 

5071 

3425 

4585 

4292 

1426 

3044 

3579  121 

4661 

1893 

141 

139 

124 

123 

5072 

3426 

4586 

4293 

1427 

3045 

3580  j  122 

4662 

1894 

142 

140 

125 

124 

5073 

3427 

4587 

4294 

1428 

3046 

3581123 

4663 

1895 

143 

141 

126 

125 

5074 

3428 

4588 

4295 

1429 

3046 

3582124 

4664 

1896 

144 

142 

127 

126 

5075 

3429 

4589 

4296 

1430 

3047 

3583 

125 

4665 

1826 

145 

143 

128 

127 

5076 

3430 

4590 

4297 

1431 

3047 

3584 

126 

4666 

1827 

146 

144 

129 

128 

5077 

3431 

4591 

4298 

1432 

3047 

35851127 

4667 

1828 

147 

145 

130 

129 

5078 

3432 

4592 

4299 

1433 

3048 

3586128 

4668 

1829 

148 

146 

131 

130 

5079 

3433 

4593 

4300 

1434 

3049 

3587 

129 

4669 

1830 

149 

147 

132 

131 

5080 

3434 

4594 

4301 

1435 

3050 

3588 

130 

4670 

1831 

150 

148 

133 

132 

5081 

3435 

4595 

4302 

1436 

3051 

3589 

131 

4671 

1832 

151 

149 

134 

133 

5082 

3436 

4596 

4303 

1437 

3051 

3590 

132 

4672 

1833 

152 

150 

135 

134  5083 

3437 

4597 

4304'  1438 

3051 

3591 

133 

4673 

1834 

153 

151 

136 

135 

5084 

3438 

4598 

43051  1439 

3052 

3592;i34|  4674 

1     1 

1835 

154 

152 

137 

136 

5085 

3439 

4599 

4306 

1440 

3053 

3593.135 

4675 

1836 

155 

153 

138 

137 

5086 

3440 

4600 

4307 

1441 

3054 

35941 . . . 

4676 

1837 

156 

154 

139 

138 

5087 

3441 

4601  4308 

1442 

3055 

3595  136 

4677 

1838 

157 

155 

140 

139 

5088 

3442 

46021  4309 

1443 

3056 

3596  138 

4678 

1839 

158 

156 

141 

140 

5089 

3443 

4603 

4310 

1444 

3056 

3597  139 

4679 

1840 

159 

157 

142 

141 

5090 

3444 

4604 

4311 

1445 

3056 

3598  140 

4680 

1841 

160 

158 

143 

142 

5091 

3445 

4605 

4312 

1446 

3057 

3599  141 

4681 

1842 

161 

159 

144 

143 

5092 

3446 

4606 

4313 

1447 

3058 

3600,142 

4682 

1843 

162 

160 

145 

144 

5093 

3447 

4607 

4314 

1448 

3059 

3601  143 

4683 

1844 

163 

161 

146 

145 

5094 

3448 

4608 

4315 

1449 

3060 

3602144 

4684 

1845 

164 

162 

147 

146 

5094 

3449 

4609 

4316 

1450 

3061 

3603145 

4685 

1846 

165 

163 

148 

147 

5095 

3450 

4610 

43171  1451 

3062 

3604  146 

4686 

1847 

166 

164 

149 

148 

5095 

3451 

4611 

4318 

1452 

3062 

3605  147 

4687 

1848 

167 

165 

150 

149 

5097 

3452 

4612 

4319 

1453  3063 

36061 148 

4688 

1849 

168 

166 

151 

150 

5098 

3453 

4613 

4320 

1454  3063 

3607  149 

4689 

1850 

169 

167 

152 

151 

5099 

3454 

4614 

4321 

1455  3064 

3608  150 

4690 

1851 

170 

168 

153 

152 

5100 

3455 

4615 

4322 

1456  3065 

3609151 

4691 

1875 

171 

169 

154 

153 

5101 

3456 

4616 

4323 

1457  3066 

3610152 

4692 

1876 

172 

170 

155 

154 

5102 

3457 

4617 

4324 

1458  3066 

3611153 

4693 

1877 

173 

171 

156 

156 

5103  3458 

4618 

4325 

1459  3067 

3612154 

4694 

1873 

174 

172 

157 

NEGOTIABLE  INSTRUMENTS        261 


14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

Mon. 

Ns. 

N.H. 

N.Y. 

N.C. 

II.  D. 

Oki. 

Ohio 

Ore. 

R.I. 

S.D. 

Tenn 

Utah 

wit. 

5964 

115 

116 

187 

2266 

6418 

116 

3175g 

4518 

122 

115 

116 

1665x2 

1678  46 

5965 

116 

117 

188 

2267 

6419 

117 

3175h 

4519 

123 

116 

117 

1665x3 

1678-47 

5966 

117 

118 

189 

2268 

6420 

118 

31751 

4520 

124 

117 

118 

1665x4 

1678-48 

5967 

118;il9i200 

2269 

6421 

119 

3175J 

4521 

125 

118 

119 

1665x5 

1679 

5968 

119 

120 

201 

2270 

6422 

120 

3175k 

4522 

126 

119 

120 

1665x6 

1679-1 

5969 

120 

121 

202 

2271 

6423 

121 

31751 

4523 

127 

120 

121 

1665x7 

1679-2 

5970 

121 

122 

203 

2272 

6424 

122 

3175m 

4524 

128 

121 

122 

1665x8 

1679-3 

5971 

122 

123 

204 

2273 

6425 

123 

3175n 

4525 

129 

122 

123 

1665x9 

1679-4 

5972 

123 

124 

205 

2274 

6426 

124 

31750 

4526 

130 

123 

124 

1665x10 

1679-5 

5973 

124 

125 

206 

2275 

6427 

125 

3175p 

4527 

131 

124 

125 

1665x11 

1679-6 

5974 

125 

126 

210 

2276 

6428 

126 

3175q 

4528 

132 

125 

126 

1664x12 

1680 

5975 

126 

127 

211 

2277 

6429 

127 

3175r 

4529 

133 

126 

127 

1665x13 

1680a 

5976 

127 

128 

212 

2278 

6430 

128 

3175s 

4530 

134 

127 

128 

1665x14 

1680b 

5977 

128 

129 

213 

2279 

6431 

129 

3175t 

4531 

135 

128 

139 

1665x15 

1680c 

5978 

129130 

214 

2280 

6432 

130 

3175U 

4532 

136 

129 

130 

1665x16 

1680d 

5979 

130131 

215 

2281 

6433 

131 

3175V 

4533 

137 

130 

131 

1665x17 

1680e 

5980 

131  132 

220 

2282 

6434 

132 

3175W 

4534 

138 

131 

132 

1665x18 

1680f 

5981 

132  133 

221 

2283 

6435 

133 

3175X 

4535 

139 

132 

183 

1665x19 

1680g 

5982 

133 

134 

222 

2284 

6436 

134 

3175y 

4536 

140 

133 

134 

1665x20 

1680h 

5983 

134 

135 

223 

2285 

6437 

135 

3175Z 

4537 

141 

134 

135 

1665x21 

16801 

5984 

135 

136 

224 

2286 

6438 

136 

3176 

4538 

142 

135 

136 

1665x22 

1680J 

5985 

136 

137 

225 

2287 

6439 

137 

3176a 

4539 

143 

137 

1665x23 

1680k 

5986 

137 

138 

226 

2288 

6440 

138 

3176b 

4540 

144 

136 

138 

1665x24 

16801 

5987 

138 

139 

227 

2289 

6441 

139 

3176c 

4541 

145 

137 

139 

1665x25 

1680m 

5988 

139 

140 

228 

2290 

6442 

140 

3176d 

4542 

146 

138 

140 

1665x26 

1680n 

5989 

140 

141 

229 

2291 

6443 

141 

3176e 

4543 

147 

139 

141 

1665x27 

1680O 

5990 

141 

142 

230 

2292 

6444 

142 

3176  f 

4544 

148 

140 

142 

1665x28 

1680p 

5991 

142 

143 

240 

2293 

6445 

143 

3176g 

4545 

149 

141 

143 

1665x29 

1681 

5992 

143 

144 

241 

2294 

6446 

144 

3176h 

4546 

150 

142 

144 

1665x30 

1681-1 

5993 

144 

145 

242 

2295 

6447 

145 

3176  i 

4547 

151 

143 

145 

1665x31 

1681-2 , 

5994 

145 

146 

243 

2296 

6448 

146 

3176  j 

4548 

152 

144 

146 

1665x32 

1681-3 

5995 

146 

147 

244 

2297 

6449 

147 

3176k 

4549 

153 

145 

147 

1665x33 

1681-4 

5996 

147 

148 

245 

2298 

6450 

148 

31761 

4550 

154 

146 

148 

1665x35 

1681-5 

5997 

148 

149 

246 

2299 

6451 

149 

3176m 

4551 

155 

147 

149 

1665x35 

1681-6 

5998 

149 

150 

247 

2300 

6452 

150 

3176n 

4552 

156 

148 

150 

1665x36 

1681-7 

5999 

150 

151 

248 

2301 

6453 

151 

31760 

4553 

157 

149 

151 

1665x37 

1681-8 

6000 

151 

152 

260 

2302 

6454 

152 

3176p 

4554 

158 

150 

152 

1665x38 

1681-9 

6001 

152 

153 

261 

2303 

6455 

153 

3176q 

4555 

159 

151 

153 

1665x39 

1681-10 

6002 

153 

154 

262 

2304 

6456 

154 

3176r 

4556  160 

152 

154 

1665x40 

1681-11 

6003 

154 

155 

263 

2305 

6457 

155 

3176s 

4557  161 

153 

155 

1665x41 

1681-12 

262        NEGOTIAMLE  INSTRUMENTS 


X 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

1112 

13 

N.I.L. 

Ala. 

Ariz. 

Col. 

Conn. 

D.C. 

Fla. 

Ida. 

III. 

Kan. 

Ky. 

Md. 

Matt. 

Mich. 

156 

5104 

3459 

4619 

4326 

1460 

3067 

3613 

155 

4695 

1879 

175 

173 

158 

157 

5105 

3460 

4620 

4327 

1461 

3068 

3614 

156 

4696 

1880 

176 

174 

159 

158 

5106 

3461 

4621 

4328 

1462 

3069 

3615 

157 

4697 

1881 

177 

175 

160 

159 

5107 

3462 

4622 

4329 

1463 

3070 

3616 

158 

4698 

1882 

178 

176 

161 

160 

5108 

3463 

4623 

4330 

1464 

3071 

3617 

159 

4699 

1883 

179 

177 

162 

161 

5109 

3464 

4624 

4331 

1465 

3073 

3618 

160 

4700 

1852 

180 

178 

163 

162 

5110 

3465 

4625 

4332 

1466 

3074 

3619 

161 

4701 

1853 

181 

179 

164 

163 

5111 

3466 

4626 

4333 

1467 

3075 

3620 

162 

4702 

1854 

182 

180 

165 

164 

5112 

3467 

4627 

4334 

1468 

3076 

3621 

163 

4703 

1855 

183 

181 

166 

165 

5113 

3468 

4628 

4335 

1469 

3076 

3622 

164 

4704 

1856 

184 

182 

167 

166 

5114 

3469 

4629 

4336 

1470 

3077 

3623 

165 

4705 

1857 

185 

183 

168 

167 

5115 

3470 

4630 

4337 

1471 

3078 

3624 

166 

4706 

1858 

186 

184 

169 

168 

5116 

3471 

4631 

4338 

1472 

3079 

3625 

167 

4707 

1859 

187 

185 

170 

169 

5117 

3472 

4632 

4339 

1473 

3080 

3626 

168 

4708 

1860 

188 

186 

171 

170 

5118 

3473 

4633 

4340 

1474 

3081 

3627 

169 

4709 

1861 

189 

187 

172 

171 

5119 

3474 

4634 

4341 

1475 

3082 

3628 

170 

4710 

1868 

190 

188 

173 

172 

5120 

3475 

4635 

4342 

1476 

3082 

3629 

171 

4711 

1869 

191 

189 

174 

173 

5120 

3476 

4636 

4343 

1477 

3083 

3630 

172 

4712 

1870 

192 

190 

175 

174 

5121 

3477 

4637 

4344 

1478 

3084 

3631 

173 

4713 

1871 

193 

191 

176 

175 

5122 

3478 

4638 

4345 

1479 

3085 

3632 

174 

4714 

1872 

194 

192 

177 

176 

5123 

3479 

4639 

4346 

1480 

3086 

3633 

175 

4715 

1873 

195 

193 

178 

177 

5124 

3480 

4640 

4347 

1481 

3086 

3634 

176 

4716 

1874 

196 

194 

170 

178 

5125 

3481 

4641 

4348 

1482 

3087 

3635 

177 

4717 

1862 

197 

195 

180 

179 

5126 

3482 

4642 

4  "49 

1483 

3088 

3636 

178 

4718 

1863 

198 

196 

181 

180 

5127 

3483 

4643 

4350 

1484 

3089 

3637 

179 

4719 

1864 

199 

197 

182 

181 

5128 

3484 

4644 

4?5I 

1485 

3090 

3638 

180 

4720 

1865 

200 

198 

183 

182 

5129 

3485 

4645 

4352 

1486 

3091 

3639 

181 

4721 

1866 

201 

199 

184 

183 

5130 

3486 

4646 

4353 

1487 

3092 

3640 

182 

4722 

1867 

202 

200 

185 

184 

5031 

3487 

4647 

4.354 

1488 

3093 

3641 

183 

4723 

2009 

203 

201 

186 

185 

5032 

3487 

4648 

4355 

1489 

3094 

3642 

184 

4724 

2010 

204 

202 

187 

186 

5033 

3487 

4649 

4356 

1490 

3095 

3643 

185 

4725 

2011 

205 

203 

188 

187 

5034 

3487 

4650 

4357 

1491 

3096 

3644 

186 

4726 

2012 

206 

204 

189 

188 

5035 

3487 

4651 

4358 

1492 

3097 

3645 

187 

4727 

2013 

207 

205 

190 

189 

5036 

3487 

4652 

4359 

1493 

3098 

3646 

188 

4728 

2014 

208 

206 

191 

190 

5037 

4653 

2934 

3647 

189 

4533 



13 

... 

1 

191 

5038 

3487 

4654 

4170 

1304 

2934 

3648 

190 

4534 

1820 

14 

207 

2 

192 

5039 

3488 

4655 

4170 

1304 

2934 

3649 

191 

4535 

1821 

15 

208 

2 

193 

5040 

3489 

4656 

4170 

1304 

2934 

3650 

192 

4536 

1822 

16 

209 

2 

194 

5041 

^90 

4657 

4170 

1304 

2934 

3651 

193 

4537 

1823 

17 

210 

2 

195 

5042 

. . . . 

4658 

4170 

1304 

3652 

194 

4538 

1824 

18 

211 

2 

196 

5043 

3491 

4659 

4170 

1304 

2934 

3653 

195 

4539 

•  •  •  • 

19 

212 

2 

197 

196 

. . . . 

•  •  •  • 

19 

.  •  • 

.,, 

198 

NEGOTIABLE  INSTRUMENTS        263 


14 

15 

16 

17 

18 

19  20    21 

22 

2324 

25 

26 

27 

Mo. 

Neb. 

N.H. 

N.Y. 

N.C. 

N.D.  Okl. 

Ohio 

Ore. 

R.I. 

S.D. 

Tenn 

Utah 

wit. 

6004 

155 

156 

264 

2306 

6458  156 

3176 1 

4558 

162 

154 

156 

1665x42 

1681-13 

6005 

156 

157 

265 

2307 

6459 

157 

3176U 

4559 

163 

155 

157 

1665x43 

1681-14 

6006 

157 

158 

266 

2308 

6460 

158 

3176V 

4560 

164 

156 

158 

1665x44 

1681-15 

6007 

158 

159 

267 

2309 

6461 

159 

3176W 

4561 

165 

157 

159 

1665x45 

1681-16 

6008 

159 

160 

268 

2310 

6462 

160 

3176x 

4562 

166 

158 

160 

1665x46 

1681-17 

6009 

160 

161 

280 

2311 

6463 

161 

3176y 

4563 

167 

159 

161 

1665x47 

1681-18 

6010 

161 

162 

281 

2312 

6464 

162 

3176Z 

4564 

168 

160 

162 

1665x48 

1681-19 

6011 

162 

163 

282 

2313 

6465 

163 

3177 

4565 

169 

161 

163 

1665x49 

1681-20 

6012 

163 

164 

283 

2314 

6466 

164 

3177a 

4566 

170 

162 

164 

1665x50 

1681-21 

6013 

164 

165 

284 

2315 

6467 

165 

3177b 

4567 

171 

163 

165 

1665x51 

1681-22 

6014 

165 

166 

285 

2316 

6468 

166 

3177c 

4568 

172 

164 

166 

1665x52 

1681-23 

6015 

166 

167 

286 

2317 

6469 

167 

3177d 

4569 

173 

165 

167 

1665x53 

1681-24 

6016 

167 

168 

161 

2318 

6470 

168 

3177e 

4570 

174 

166 

168 

1665x54 

1681-25 

6017 

168 

169 

288 

2319 

6471 

169 

3177  f 

4571 

175 

167 

169 

1665x55 

1681-26 

6018 

169 

170 

289 

2320 

6472 

170 

3177g 

4572 

176 

168 

170 

1665x56 

1681-27 

6019 

170 

171 

300 

2321 

6473 

171 

3177h 

4573 

177 

169 

171 

1665x57 

1681-28 

6020 

171 

172 

301 

2322 

6474 

172 

3177  i 

4574 

178 

170 

172 

1665x58 

1681-29 

6021 

172 

173 

302 

2323 

6475 

173 

3177  j 

4575 

179 

171 

173 

1665x59 

1681-30 

6022 

173 

174 

303 

2324 

6476 

174 

3177k 

4576 

180 

172 

174 

1665x60 

1681-31 

6023 

174 

175 

304 

2325 

6477 

175 

31771 

4577 

181 

173 

175 

1665x61 

1681-32 

6024 

175 

176 

305 

2326 

6478 

176 

3177m 

4578 

182 

174 

176 

1665x62 

1681-33 

6025 

176 

177 

306 

2327 

6479 

177 

3177n 

4579 

183 

175 

177 

1665x63 

1681-34 

6026 

177 

178 

310 

2328 

6480 

178 

31770 

4580 

184 

176 

178 

1665x64 

1681-35 

6027 

178 

179 

311 

2329 

6481 

179 

3177p 

4581 

185 

177 

179 

1665x65 

1681-36 

6028 

179 

180 

312 

2330 

6482 

180 

3177q 

4582 

186 

178 

180 

1665x66 

1681-37 

6029 

180 

181 

313 

2331 

6483 

181 

3177r 

4583 

187 

179 

181 

1665x67 

1681-38 

6030 

181 

182 

314 

2332 

6484 

182 

3177s 

4584 

188 

180 

182 

1665x68 

1681-39 

6031 

182 

183 

315 

2333 

6485 

183 

3177 1 

4585 

189 

181 

183 

1665x69 

1681-40 

6032 

183 

184 

320 

2334 

6486 

184 

3177U 

4586 

190 

182 

184 

1665x70 

1684 

6033 

184 

185 

321 

2335 

6487 

185 

3177V 

4587 

191 

183 

185 

1665x71 

1684-1 

6034 

185 

186 

322 

2336 

6488 

186 

3177w 

4588 

192 

184 

186 

1665x72 

1684-2 

6035 

185 

187 

323 

2337 

6489 

187 

3177X 

4589 

193 

185 

187 

1665x73 

1684  3 

6036 

187 

188 

324 

2338 

6490 

188 

3177y 

4590 

194 

186 

188 

1665x74 

1684-4 

6037 

188 

189 

325 

2339 

6491 

189 

3177Z 

4591 

195 

187 

189 

1 165x75 

1684-5 

5482 

1 

. . . . 

6492 

I 

4592 

188 

73 

1665x76 

5843 

189 

190 

2 

2340 

6493 

3178 

4592 

1 

189 

1665X77 

1675 

5844 

190 

191 

3 

2342 

6494 

3178a 

4592 

2 

190 

2| 

16615x78 

1675 

5845 

191 

192 

4 

2343 

6495 

3178b 

4592 

3 

191 

1665X79 

1675 

5846 

192 

193 

5 

6495 

3178c 

4592 

4 

192 

°  a 
to  . 

1665X80 

1675 

5847 

193 

194 

6 

2345 

6497 

3178d 

4593 

5 

193 

2-T3 

1665X81 

1675 

5848 

194 
197 
198 

195 
196 
196 

7 

2344 

6498 

I 

190 

3178e 

4594 

6 

194 

O  i3 

1665x82 

1675 
1684-7 

264        NEGOTIABLE  INSTRUMENTS 


(X)  In  the  following  States,  the  numbering  of  the 
sections  (in  some  cases  the  sub-sections)  is  the  same  as  that 
of  the  commissioners'  draft  in  the  first  column: 

IOWA.— Code  Supl.  (1%7),  Tit.  XV.,  sec.  3060a. 

LOUISIANA.— Laws  of  1904,  Act.  64. 

MINNESOTA.— Laws  of  1913,  c.  272. 

MISSOURI.— Laws  of  1905,  page  243;  Annot.  Sts. 
(1906),  ch.  5,  sec.  463. 

NEVADA. Laws  of  1907,  ch.  62. 

NEW  JERSEY.— Laws  of  1902,  ch.  184. 

NEW  MEXICO.— Laws  of  1907,  ch.  83. 

PENNSYLVANIA.— Laws  of  1901,  page  194. 

VERMONT.— Laws  of  1913,  c.  99. 

VIRGINIA.— Laws  of  1897-8,  ch.  866;  Code  (1904)  ch. 
133a,  sec.  2841a. 

WASHINGTON.— Laws  of  1899,  ch.  149. 

WEST  VIRGINIA.— Acts  of  1907,  ch.  81. 

WYOMING.— Laws  of  1905,  ch.  43. 

HAWAII.— Laws  of  1907,  ch.  89. 


Code  1907,  ch.  115. 

R.  S.  1901,  Tit.  XLIX. 

R.  S.  1908,  ch.  XCV. 

G.  S.  1902,  Tit.  33,  ch.  234. 

Code  1902,  ch.  XLVI. 

G.  S.  1906,  Tit.  5,  ch.  2. 

Rev.  Codes,  1908,  Tit.  13. 

Laws  of  1907,  page  403. 

G.  S.  1905,  ch.  70. 

Sts.  (1909),  Art.  9. 

Pub.  Gen.  Laws,  1904,  Art.  13. 

R.  L.  1902,  ch.  73. 

Pub.  Acts.,  1905,  page  389. 

Civ.  Code,  1907,  Tit.  XV. 

Comp.  Sts.  1907,  ch.  41. 

Laws  of  1909,  ch.  123. 


NEGOTIABLE  INSTRUMENTS        265 

(17)  Consol.  Laws,  ch.  XXXVIII. 

(18)  R.  S.  1908,  ch.  54. 

(19)  Rev.  Codes,  1905,  ch.  90. 

(20)  Laws  of  1909,  ch.  XXIV. 

(21)  Anno.  Sts.  1787-1908,  Tit.  1,  Div.  2,  ch.  2. 

(22)  Anno.  Codes  and  Cts.  1902,  Tit.  XXXVIII. 

(23)  Gen.  Laws  1909,  Tit.  XIX. 

(24)  Laws  of  1913. 

(25)  Code  Supl.  1897-1903. 

(26)  Comp.  Sts.  1907,  Tit.  53. 

(26)  Comp.  Sts.  1907,  Tit.  53. 

(27)  Sts.  Supl,  1899-1906,  ch.  78. 


CHAPTER  VIII 


Practical  Exercises 

In  connection  with  ''Negotiable  Instruments"  the 
following  practical  exercises  are  prescribed: 

1.  A  having  a  claim  for  $100  against  B  writes: 
"I  assign  my  claim  for  $100  against  B  to  C  or  order" 
and  gives  the  paper  to  C,  who  pays  value  for  it.  B 
becomes  insolvent  subsequently.  Can  C  demand 
payment  from  A? 

2.  A  promissory  note,  in  ordinary  form,  con- 
tains the  following  addition:  "This  note  is  given 
for  legal  services  to  be  rendered  by  the  payee."  Is 
this  note  negotiable? 

3.  A  promise  dated  and  signed  is  in  this  form :  "I 
promise  to  pay  A  or  order  what  I  now  owe  A."  As- 
suming that  the  signer  owes  A  $100  at  the  time  this 
instrument  is  delivered,  is  it  negotiable? 

4.  Is  the  following  instrument  negotiable:  "I 
promise  to  pay  A  or  order  $100  with  exchange  on 
New  York  and  costs  of  collection.    B."? 

5.  A  note  is  payable  to  the  order  of  A  "when  the 
Panama  Exposition  opens."  Is  the  note  negotia- 
ble? 

6.  A  collateral  note,  payable  Jan.  1,  1914,  con- 
tains a  power  to  declare  the  note  due  at  any  time 
the  holder  shall  feel  insecure  and  to  sell  the  collat- 
eral and  apply  the  proceeds  towards  the  payment  of 
the  note.    Is  this  note  negotiable? 

266 


^  NEGOTIABLE  INSTRUMENTS        267 

7.  After  a  note  had  been  discounted  at  a  bank 
and  before  its  maturity  the  bank  demanded  further 
security.  In  compliance  with  this  demand  the 
maker  brought  his  friend  A  to  the  bank  who  there- 
upon signed  the  note  on  the  back.  At  maturity,  the 
note  being  dishonored  by  the  maker  and  notice  sent 
to  the  endorser,  is  the  endorser  liable? 

8.  A  wishing  to  make  a  Christmas  present  to  his 
brother  makes  and  delivers  to  him  on  Dec.  24th  a 
promissory  note  signed  by  himself  (A).  Is  A  liable 
on  this  note  at  maturity? 

9.  A  wishing  to  make  a  Christmas  present  to  his 
brother  B  gives  him  on  Christmas  Day  a  note  pay- 
able to  bearer  signed  by  C  which  A  had  received 
from  C  in  payment  for  a  horse.  Can  B  enforce  this 
note  at  maturity  against  C? 

10.  A  lawyer  who  had  done  certain  work  for  A 
sent  A  a  bill  for  $1,000.  A  returned  by  mail  his 
check  for  $500,  on  which  was  written  "this  check  is 
in  full  payment  for  all  my  indebtedness  to  date." 
The  lawyer  took  the  check  and  cashed  it  but  wrote 
at  once  to  A :  "I  credit  you  with  the  amount  of  your 
check  and  enclose  herewith  my  bill  for  the  remain- 
ing $500  due  me."  Assuming  that  $1,000  was  a 
reasonable  charge  for  the  lawyer's  services  can  he 
recover  the  remaining  $500? 

11.  On  the  maturity  of  a  note  for  $100  made  by 
A,  A  sent  the  holder  a  check  for  $90,  on  which  was 
written:  "This  check  is  in  full  payment  for  my 
note."    The  holder  of  the  note  cashed  the  check  but 


268        NEGOTIABLE  INSTRUMENTS 

wrote  at  once  to  A :  "I  credit  you  with  the  amount 
of  your  check  and  now  demand  payment  for  the 
remaining  $10  due  upon  the  note."  Can  the  holder 
recover  the  remaining  $10? 

12.  The  holder  of  a  time  bill  fails  to  present  it  for 
acceptance.    Is  the  drawer  discharged? 

13.  When  does  certification  of  a  check  discharge 
the  drawer  and  endorsers? 

14.  A  bank  cashes  a  check  drawn  upon  it  and 
later  discovers  that  the  drawer's  name  is  forged. 
Can  the  bank  recover  the  amount  paid  from  the 
payee  of  the  check  who  receives  payment? 

15.  A  note  is  payable  to  a  person  who  afterwards 
becomes  insane  and  is  put  under  guardianship. 
(Such  a  person  has  no  capacity  to  sign  or  endorse 
negotiable  paper  or  make  other  contracts.)  The  in- 
sane payee  endorses  and  delivers  the  note  to  X,  who 
presents  it  for  payment  to  the  maker.  Is  the  maker 
bound  to  pay? 

16.  A  note  is  made  payable  to  a  corporation, 
which  is  not  authorized  by  law  to  endorse  negotia- 
ble paper,  but  does  in  fact  endorse  the  note  to  a 
holder  in  due  course.  Can  the  latter  recover  from 
the  maker? 

17.  "I  assign  this  instrument."  Is  this  an  en- 
dorsement when  written  on  the  back  of  the  note  by 
the  holder? 

18.  What  difference  in  the  rights  of  parties  does 
it  make  whether  an  assignment  upon  a  note  is  an 
endorsement  or  not? 


NEGOTIABLE  INSTRUMENTS        269 

19.  If  a  bank  having  funds  to  meet  a  check  re- 
fuses to  pay  it  without  excuse,  is  it  liable  to  the 
holder  of  the  check? 

20.  A  check  is  endorsed  for  collection  and  depos- 
ited in  a  bank  which  fails  and  goes  into  the  hands 
of  a  receiver  before  the  check  is  collected.  The 
depositor  demands  a  return  of  the  check.  The  re- 
ceiver claims  the  right  merely  to  credit  its  amount 
on  the  depositor's  account  on  which  a  dividend  will 
ultimately  be  paid.    Which  contention  is  right? 

21.  A  sells  a  note  of  which  he  is  the  payee  and 
endorses  it  without  recourse  for  value  to  B.  The 
maker's  signature  was  forged  though  A  had  no 
knowledge  of  the  fact.    Is  A  liable  to  B  ? 

22.  A  borrows  money  from  a  bank  on  his  note 
endorsed  by  B  and  C,  both  of  whom  signed  for  A's 
accommodation.  B's  signature  was  above  C's.  A 
failed  to  pay  the  note  at  maturity  and  on  receiving 
notice  of  the  dishonor  B  paid  the  holder  the  amount 
of  the  note.  Can  B  recover  all  or  any  of  his  pay- 
ment from  C  ? 

23.  An  instrument  payable  to  bearer  was  spec- 
ially endorsed*  to  A  and  by  A  was  transferred  by 
delivery.  Can  the  maker  demand  from  the  holder 
A's  endorsement  before  making  payment? 

24.  A  check  payable  to  bearer  was  lost  by  the 
owner  and  a  finder  transferred  it  for  value  to  one 
who  took  it  in  good  faith.  Can  the  original  owner 
reclaim  the  check  from  this  holder? 

25.  A  check  intended  to  be  payable  to  John  Y. 


270        NEGOTIABLE  INSTRUMENTS 

Brown  and  which  was  delivered  to  him  by  the 
drawer  was  on  its  face  made  payable  to  Jonathan 
Y.  Browne.  Can  the  drawee  bank  safely  pay  this 
check  and  if  so,  what  form  of  endorsement  should 
be  made? 

26.  A  check  made  payable  to  James  Smith  comes 
into  the  hands  of  a  person  of  that  name  who  was 
not  intended  to  be  the  payee.  He  presents  the  check 
to  the  drawee  bank  and  being  known  as  James 
Smith  obtains  payment.  Can  the  bank  charge  this 
payment  to  the  customer's  account? 

27.  A  note  is  made  payable  to  A  and  B.  A  en- 
dorses his  own  name  and  also  B's  and  sells  the  note 
to  a  purchaser  who  buys  in  good  faith.  Can  the 
latter  collect  from  the  maker? 

28.  By  cleverly  substituting  a  promissory  note 
for  a  letter  of  introduction  A  induced  B  to  sign  a 
note  payable  to  A's  order  when  B  supposed  that  he 
was  merely  signing  a  letter.  A  transferred  the  note 
to  a  holder  in  due  course.    Is  B  liable  upon  it? 

29.  A  bank  pays  a  check  with  a  forged  endorse- 
ment.   What  are  its  rights? 

30.  A  bank  pays  a  raised  check.  What  are  its 
rights? 

31.  A  added  to  a  note  payable  to  him  "with  cur- 
rent exchange  on  New  York,"  supposing  errone- 
ously that  this  exchange  had  been  agreed  to  by  the 
maker.  What  are  A's  rights  against  the  maker  on 
maturity  of  the  note? 


NEGOTIABLE  INSTRUMENTS        271 

32.  Is  there  any  objection  to  buying  negotiable 
paper  from  one  who  is  not  of  age? 

33.  How  may  a  negotiable  instrument  be  dis- 
charged? 

34.  The  maker  of  a  note  pays  it  before  maturity 
but  fails  to  take  it  up.  Later  the  holder  fraudulently 
sells  and  endorses  the  note  to  an  innocent  purchaser 
for  value.    What  are  his  rights? 

35.  Does  payment  by  an  endorser  discharge  a 
negotiable  instrument? 

36.  An  instrument  is  issued  with  a  blank  for  the 
amount.  An  amount  is  filled  in.,  in  excess  of  that 
authorized  by  the  maker  and  when  the  amount  is 
thus  filled  in,  the  note  is  discounted  by  a  bank  which 
took  it  in  good  faith  before  maturity  but  with 
knowledge  that  a  blank  had  been  filled  in.  What 
are  the  rights  of  the  bank? 

37.  A,  by  false  representations,  induced  B  to 
make  a  note  payable  to  him  and  he  thereupon  de- 
posited it  as  collateral  security  at  a  bank  to  secure 
an  old  indebtedness.  What  is  the  liability  of  the 
maker  of  the  note  to  the  bank  at  maturity. 

38.  A,  by  threats  and  fraud,  induced  B  to  make  a 
note  payable  to  C  for  a  debt  due  to  C  from  B.  C 
was  ignorant  until  after  he  received  the  note  of  A's 
threats  and  fraud.    Is  B  liable  on  the  note? 

39.  A  writes  out  a  form  of  note  payable  to  bearer 
and  puts  it  in  his  safe  intending  to  get  it  discounted 
the  following  day.     It  is  stolen  from  his  safe  and 


272        NEGOTIABLE  INSTRUMENTS 

sold  to  a  holder  in  due  course.    Can  he  recover  on 
the  note? 

40.  A  gave  a  note  in  payment  for  a  horse,  which 
died  before  it  was  delivered  to  A.  Is  A  liable  on  the 
note? 

41.  A  holder  of  a  note  says  to  an  endorser:  "I 
discharge  you  from  all  liability  on  that  note."  Later 
the  holder  seeks  to  recover  payment  from  the  en- 
dorser.   Can  he  do  so? 

42.  The  holder  of  a  note  before  its  maturity  gives 
a  written  release  to  the  maker  from  all  liability. 
Thereafter  he  transfers  the  note  to  a  holder  in  due 
course.    Can  the  holder  recover  from  the  maker? 

43.  A  makes  a  check  payable  to  B  for  $5.  Owing 
to  spaces  left  blank  by  A,  B,  by  writing  "hundred" 
after  the  word  "five"  and  two  zeros  after  the  figure 
"five",  makes  the  check  seem  to  have  been  written 
originally  for  $500.  The  drawee  bank  pays  the 
check.    Can  it  charge  its  customer  for  the  payment? 

44.  A  and  B  make  a  note  which  begins  "We  sev- 
erally promise  to  pay,"  etc.  Before  maturity  of  the 
note  the  payee  gives  a  release  from  liability  to  A. 
Can  he  thereafter  recover  from  B  ? 

45.  A  and  B  sign  a  note  beginning  as  follows: 
"We  jointly  and  severally  promise  to  pay."  The 
payee  gives  A  a  release  from  liability  before  matur- 
ity.   Can  the  holder  recover  from  B? 

46.  A  and  B  make  a  note  beginning  as  follows: 
"We  jointly  promise  to  pay",  etc.    The  payee  gives 


NEGOTIABLE  INSTRUMENTS        273 

A  a  release  from  liability.    Can  he  afterwards  hold 
B? 

47.  The  holder  of  a  note  made  by  A  and  B  jointly 
recovers  judgment  against  them.  Must  he  collect 
half  the  claim  on  the  judgment  from  each  maker? 

48.  The  holder  of  an  endorsed  note,  which  had 
been  dishonored  at  maturity  and  the  endorser 
charged,  enters  into  a  contract  with  the  endorser 
that  he,  the  holder,  will  not  require  payment  from 
the  endorser  for  two  months.  Does  this  agreement 
affect  the  liability  of  the  maker? 

49.  A  savings  bank  holds  a  note  signed  by  A  as 
principal  and  B  and  C  as  sureties.  A  has  deposited 
with  the  bank  certain  collateral  security.  Later  de- 
siring to  use  this  collateral  A  gets  the  bank  to  ac- 
cept instead  other  collateral  of  greater  value.  At 
maturity  the  note  is  unpaid  and  A  is  insolvent.  Can 
the  bank  hold  B  and  C? 

50.  How  can  one  always  safely  discharge  any 
party  to  a  negotiable  instrument  without  discharg- 
ing the  others? 

51.  The  maker  of  a  note  has  a  claim  in  set-off 
against  the  payee  by  virtue  of  another  debt.  The 
payee  of  the  note  transfers  it  for  value  after  matur- 
ity to  one  who  has  no  knowledge  of  this  claim  in 
set-off.  Can  the  maker  when  sued  by  the  holder  of 
the  note  set  up  his  cross  claim  against  the  payee? 

52.  An  oral  agreement  is  made  when  a  note  is 
discounted  that  it  need  not  be  paid  at  maturity  but 


274        NEGOTIABLE  INSTRUMENTS 

will  be  extended.    Can  this  oral  agreement  be  urged 
as  a  defence  to  a  suit  on  the  note  at  maturity? 

53.  A  note  made  Jan.  5,  1913,  is  payable  in  thirty 
days.  On  what  day  should  it  be  presented  in  order 
to  charge  endorsers? 

54.  When  may  an  action  at  law  on  this  note  first 
be  brought  against  the  maker? 

55.  Suppose  the  note  referred  to  in  the  preceding 
two  questions  had  been  procured  by  fraud  and  was 
presented  on  the  morning  of  Feb.  4th  and  dishon- 
ored and  later  in  the  day  was  sold  to  a  bona  fide  pur- 
chaser for  value,  without  notice.    Can  he  enforce  it? 

56.  The  holder  of  a  time  note,  after  maturity,  en- 
dorses the  note  to  A.  What,  if  anything,  must  A 
do  in  order  to  charge  this  endorser? 

57.  Suppose  the  holder  of  a  check  negligently 
fails  to  cash  it  for  a  year  and  the  bank  on  which  it 
is  drawn  refuses  payment  because  it  is  so  old.  Has 
the  holder  any  right  against  the  drawer? 

58.  A  note  with  four  endorsers  is  dishonored  and 
the  endorsers  duly  notified.  May  the  holder  obtain 
part  payment  from  any  one  without  discharging 
others? 

59.  A  promissory  note  provides  for  the  payment 
of  interest  at  4%.  The  legal  rate  is  6%.  If  the 
note  is  dishonored  at  maturity  at  what  rate  will  in- 
terest be  calculated  after  that  date? 

60.  A  note  payable  on  demand  contains  no  state- 
ment in  regard  to  interest.  It  is  dated  Jan.  5,  1913, 
delivered  Jan.  10th  and  presented  for  payment  Jan. 


NEGOTIABLE  INSTRUMENTS        275 

25th  and  then  dishonored.    From  which,  if  any,  of 
these  dates,  will  interest  begin  to  run? 

61.  What  is  meant  by  re-exchange? 

62.  How  may  a  party  to  a  negotiable  instrument 
payable  on  demand,  or  overdue,  stop  further  inter- 
est? 

63.  A  bill  of  exchange  is  payable  ten  days  after 
sight.  The  payee  holds  it  for  three  months  and 
then  presents  it  for  acceptance  which  is  refused  and 
the  drawer  is  promptly  notified.  Is  the  drawer  lia- 
ble? 

64.  Where  should  an  instrument  be  presented 
which  states  no  place  of  payment? 

65.  Suppose  the  maker  of  a  note  writes  before 
maturity :  "It  is  no  use  to  present  that  note,  I  shall 
not  pay  it."  Is  the  endorser  liable  without  present- 
ment being  made  to  the  maker? 

66.  After  maturity  of  a  negotiable  instrument  a 
discharged  endorser  promises  the  holder  to  waive 
the  lack  of  diligence  in  discharging  him.  Is  he  there- 
upon liable? 

67.  Before  maturity  an  endorser  says  to  the 
holder:  "You  need  make  no  presentment  of  that 
note  to  the  maker  at  m.aturity ;  I  waive  the  present- 
ment." No  presentment  was  made,  the  note  was 
unpaid  and  no  notice  of  its  non-payment  was  sent  to 
the  endorser.    Is  the  endorser  discharged? 

68.  The  maker  of  an  endorsed  note  absconded 
shortly  before  maturity  thereby  excusing  present- 
ment.   No  notice  of  the  failure  to  pay  the  instru- 


276        NEGOTIABLE  INSTRUMENTS 

ment  at  maturity  was  sent  to  the  endorser.    Is  the 
endorser  liable? 

69.  The  holder  of  an  endorsed  note  gives  no 
notice  of  its  dishonor  but  the  last  endorser  notifies 
a  prior  endorser  seasonably  that  the  note  was  dis- 
honored. What  are  the  holder's  rights  against  the 
endorsers? 

70.  An  endorsed  note  is  dishonored  at  maturity. 
The  endorser  though  not  notified  by  the  holder 
knew  that  the  note  was  dishonored  immediately 
after  the  dishonor  took  place.  Is  the  endorser  liable 
to  the  holder? 

71.  Notice  of  the  dishonor  sent  to  an  endorser  by 
mail,  properly  addressed  and  stamped,  fails  to  reach 
him  through  fault  of  the  Post  Office.  Is  the  en- 
dorser charged? 

72.  Notice  sent  promptly  by  telegram,  prepaid, 
properly  addressed,  failed  to  reach  the  endorser, 
through  fault  of  the  telegraph  company.  Is  the  en- 
dorser charged? 

73.  What  is  the  latest  time  that  notice  of  dis- 
honor may  be  effectively  sent  to  an  indorser  living 
in  another  city,  when  a  note  is  dishonored  on 
Thursday,  December  24th? 

74.  Suppose  a  check  is  not  presented  promptly. 
When  presented  it  is  dishonored  and  notice  is 
promptly  sent  to  the  drawer  and  indorsers.  Are 
they  liable? 

75.  What  instruments  must  be  protested  in  order 
to  charge  parties  secondarily  liable? 


NEGOTIABLE  INSTRUMENTS        277 

76.  Why  is  it  often  advisable  to  protest  instru- 
ments when  protest  is  not  required  by  the  law? 

77.  A  is  a  holder  in  due  course  of  the  third  part  of 
a  set  of  foreign  bills  of  exchange.  B  by  a  subse- 
quent purchase  is  a  holder  in  due  course  of  the  first 
part.  The  drawee  refuses  to  pay  either  A  or  B  and 
both  A  and  B  seasonably  give  notice  of  dishonor  to 
the  drawer.    To  whom  is  he  liable  ? 

78.  When  does  the  statute  of  limitations  begin  to 
run  on  a  demand  note? 

79.  When  does  the  statute  of  limitations  begin  to 
run  on  a  note  dated  August  1,  1913,  payable  in  two 
months? 

80.  Suppose  a  note  falls  due  at  a  bank  and  is  not 
paid?  May  the  bank  refuse  to  honor  the  maker's 
checks  though  covered  by  sufficient  deposits,  and 
apply  the  deposit  account  to  the  payment  of  the 
note? 

81.  A  owed  two  notes  to  a  bank,  one  of  which 
only  was  secured  by  collateral.  The  secured  note 
fell  due  and  being  unpaid  the  bank  sold  the  collat- 
eral, realizing  a  larger  sum  than  the  amount  of  the 
note.  A  then  went  into  bankruptcy,  the  second^ 
note  not  yet  being  due.  Can  the  bank  hold  the  ex- 
cess realized  from  sale  of  the  collateral  and  credit  it 
on  the  unsecured  note? 

82.  Can  a  bank  insist  on  a  customer  endorsing  a 
check  drawn  on  it,  payable  to  cash? 

83.  A  bank  paid  a  forged  check  and  in  good 
faith  charged  it  to  its  customer's  account,  returning 


278        NEGOTIABLE  INSTRUMENTS 

to  him  with  his  cancelled  checks  the  forged  check 
at  the  end  of  the  month.  The  customer  fails  to  dis- 
cover the  forgery  for  two  years.  Can  he  then  suc- 
cessfully demand  that  the  bank  shall  give  him  credit 
for  the  amount  of  it? 

84.  A  forged  check  was  cashed  by  a  bank  on 
which  it  was  not  drawn.  Can  it  recover  the  pay- 
ment? 

85.  A  forged  check  was  deposited  in  a  bank  on 
which  it  was  not  drawn  and  was  collected  by  that 
bank  from  the  drawee  bank.  What  are  the  rights 
of  the  parties  when  the  forgery  is  discovered  soon 
afterwards?  « 

86.  A  check  made  payable  to  two  trustees  was 
indorsed  by  one  of  them  on  behalf  of  himself  and 
co-trustee.    Should  the  drawee  bank  pay  the  check? 

87.  A  check  made  payable  to  two  persons  who 
are  partners  was  indorsed  by  one  of  them  on  behalf 
of  himself  and  co-partner.  Should  the  drawee  bank 
pay  the  check? 

88.  Is  the  maker  of  a  note  who  signed  it  when  he 
was  intoxicated  liable  upon  it? 

89.  A  forged  signature  on  a  note  was  shown  to 
B  and  he  was  asked  if  the  signature  was  his.  He 
said  it  was,  supposing  this  to  be  the  fact.  Later,  on 
presentment  of  the  note  for  payment,  B  discovers 
the  forgery  and  refuses  to  pay  the  note.  Under 
what  circumstances,  if  any,  would  B  be  liable? 

90.  A  depositor  had  an  account  in  the  First  Na- 
tional Bank  and  also  in  the  Fourth  National  Bank, 


NEGOTIABLE  INSTRUMENTS        279 

and  checks  on  the  two  which  were  similar  in  ap- 
pearance. By  mistake  a  check  drawn  by  him  on  the 
Fourth  National  Bank  is  presented  to  the  First  Na- 
tional Bank,  paid  and  cancelled  by  it.  What  are 
the  rights  of  the  First  National  Bank? 

91.  A  drawee  bank  pays  a  check  after  the  bank- 
ruptcy of  the  depositor,  in  ignorance  of  the  bank- 
ruptcy.   What  are  its  rights  and  liabilities? 

92.  A  check  is  cashed  by  the  bank  on  which  it  is 
drawn  and  later  it  is  discovered  that  the  drawer's 
account  was  insufficient  to  meet  the  payment.  What 
are  the  rights  of  the  bank? 

93.  A  check  is  deposited  in  the  bank  on  which  it 
is  drawn  and  is  credited  to  the  depositor's  account. 
Later  it  is  discovered  that  the  drawer's  account  was 
insufficient  to  meet  the  check.  What  are  the  rights 
of  the  bank? 

94.  On  the  back  of  a  note  at  the  top  are  the 
words  "Waiving  demand  and  notice."  Below  are 
the  names  of  several  indorsers.  Must  presentment 
to  the  maker  be  made  and  notice  sent  to  any  or  all 
of  these  indorsers  necessary  to  charge  them? 

95.  On  a  bill  of  exchange  are  written  the  words 
"protest  waived."  Is  presentment  and  notice  nec- 
essary to  charge  the  drawer? 

96.  Suppose  the  maker  of  a  note  is  dead  when  it 
matures.    What  would  you  do  to  charge  indorsers? 

97.  Suppose  the  indorser  of  a  note  is  dead  at 
its  maturity,  what  wonld  you  do  to  charge  his 
estate? 


280        NEGOTIABLE  INSTRUMENTS 

98.  A  father  gives  a  note  for  his  son's  debt  and 
when  called  on  to  pay,  refuses  on  the  ground  that 
he  received  no  consideration  for  his  signature.  Is 
he  liable? 

99.  Define  a  qualified  indorsement. 

I  100.     Define  an  anomalous  or  irregular  indorse- 
ment. 

INSTRUCTIONS.— In  City  Chapter  Classes  the 
foregoing  questions  are  to  be  used  in  connection 
with  the  respective  subjects  to  which  they  apply. 
Correspondence  Chapter  students  will  submit  an- 
swers to  all  of  the  foregoing  questions  at  the  same 
time. 


INDEX 

To  the  Negotiable  Instruments  Law 

[The  figures  refer  to  the  sections  of  the  statute,  not  to 
the  paragraphs  of  the  text.  The  comment  under  the  respec- 
tive sections  of  the  statute  may  be  found  from  the  index  by- 
reference  to  the  paragraphs  following  the  sections  of  the 
statute  referred  to.] 

ABSOLUTE  DEFENCE  (See  DEFENCE) 

ACCEPTANCE,  meanings  of,  191,  132. 
how  made  on  bill,  132,  133. 
by  separate  instrument,  134. 
of  non-existing  bill,  135. 
time  allowed  for,  136. 
by  destruction  or  detention  of  bill,  137. 
of  incomplete,  overdue,  or  dishonored  bill,  138. 
of  bills  in  a  set,  181. 
general  or  qualified,  139,  140. 
to  pay  at  particular  place,  140. 
forms  of  qualified,  141. 
qualified,  rights  of  parties,  142. 

ACCEPTANCE  FOR  HONOR,  when,  by  whom,  and  for 

what  sum  may  be  made,  161. 
how  made,  162. 
for  whom  made,  161,  163. 
liability  of  acceptor  for  honor,  164,  165. 
maturity    of    bill    payable    after    sight    accepted    for 

honor,  166. 
protest  of  bill  accepted  for  honor,  167. 
presentment  for  payment,  168. 
delay  in  presentment  excused  when,  169. 
protest  of  dishonored,  170. 

281 


282        NEGOTIABLE  INSTRUMENTS 

ACCEPTOR,  engagement  and  admissions  of,  62. 

charged  without  presentment,  70. 
ACCOMMODATION  INSTRUMENT,  discharged  by  pay- 
ment  by  accommodated  party,  119. 

liability  of  accommodation  party,  29. 

accommodated  party  paying  may  not  reissue,  121. 
ACTION,  meaning  of,  191. 
AGENT,  signature  by,   19,  23. 

when  personally  liable,  20. 

signature  "by  procuration,"  21. 

negotiating  instrument  liable  when,  69. 

(See  NOTICE  OF  DISHONOR.) 
ALTERATION,  effect  of  material,  124. 

rights  of  holder  in  due  course,  124. 

as  a  defence,  55. 

what  alterations  material,  125. 
AMBIGUOUS  INSTRUMENT,  construction  of,  17. 
ANTECEDENT  DEBT,  constitutes  value,  25. 
ANTEDATED  INSTRUMENT,  not  invalid,  12. 

when  title  acquired,  12. 
ASSIGNMENT,  bill  is  not  of  itself,  127. 

check  is  not  of  itself,  189. 
ATTORNEY'S  FEE,  provision  for,  2. 
BANK,  meaning  of,  191. 

making  payable  at,  equivalent  to  order  to  pay,  87. 

presentment  of  instrument  payable  at,  75. 

not  liable  on  check  unless  accepted  or  certified,  189. 
BANKER'S  LIEN,  supplementary  paragraphs. 
BANKRUPTCY,  of  holder,  a  defence,  55. 
BEARER,  meaning  of,  191. 

negotiable  instrument  payable  to,  1,  9. 

instrument  payable  to,  indorsed  specially,  40. 
BILL,  meaning  of,  191. 


NEGOTIABLE  INSTRUMENTS        283 

BILL  OF  EXCHANGE,  defined,  126. 
same  as  bill,  191. 

ambiguous  instrument  treated  as  bill  or  note,  17. 
not  of  itself  an  assignment,  127. 
may  be  addressed  to  two  or  more  drawers,  128. 
inland  and  foreign,  129. 
when,  may  be  treated  as  promissory  note,  130. 

BILLS  IN  A  SET,  constitute  one  bill,  178. 

different  parts  negotiated,  rights  of  holder,  179. 
(See  ACCEPTANCE,  DISCHARGE,  INDORSER, 
PAYMENT.), 
BLANKS,  who  may  fill,  13,  14. 

effect  when  delivered  instrument  improperly  filled,  14. 
when  undelivered  instrument  improperly  filled,  15. 
BONDS,  public  or  corporation,  liability  of  person  negotiat- 
ing, 65. 

BROKER,  negotiating  instrument,  liability  of,  69. 
BURDEN  OF  PROOF,  when  title  of  transfer  or  defec- 
tive, 59. 

CANCELLATION,  of  instrument  as  discharge,  119. 
of  signature,  120. 

unintentional,  by  mistake  or  without  authority,  123. 
burden  of  proof,  123. 
CAPACITY,  maker  admits  capacity  of  payee  to  indorse,  60. 
so  does  drawer,  61. 

acceptor  admits   capacity   of  drawer  to  draw  and   of 
payee  to  indorse,  62. 

(See  WARRANTY.) 
CASHIER,  as  payee  or  indorsee,  42. 
CERTIFICATION,  (See  CHECK.) 
CHECK,  defined,  185. 

when,    must    be    presented    for    pa)mient,    effect    of 
delay,  186. 


284        NEGOTIABLE  INSTRUMENTS 

CHECK,  certification  of,  187,  188. 
not  of  itself  an  assignment,  189. 
(See  BANK.) 

COLLATERAL  SECURITIES,  provision  for  sale  of,  5. 
COLLECTIONS,  supplementary  paragraphs. 
CONDITIONAL  INDORSEMENT,  payor  may  disregard 
condition,  but  subsequent  transferee  takes  subject 
to  it,  39. 
CONFESSION  OF  JUDGMENT,  provision  for,  5. 
CONSIDERATION,  presumption  of,  24. 

requirements  of,  25,  29. 

when  absence  or  failure  of  a  defence,  28,  55. 
(See  VALUE.) 
CONTINGENCY,  instrument  payable  on,  not  negotiable,  4. 
CORPORATION,  included  in  "person,"  191. 

indorsement  by,  22. 
CURRENT  MONEY,  designation  of  kind  does  not  affect 

negotiability,  6. 
DAMAGES,  recoverable  by  holder,  51. 
DATE,  omission  of,  does  not  affect  negotiability,  6. 

in  instrument,  prima  facie  true  date,  11. 

instrument  may  be  antedated  or  post-dated,  12. 

when  date  may  be  inserted,  13. 

insertion  of  wrong  date,  13. 

construction,  when  instrument  not  dated,  17. 

alteration  of,  125. 
DAYS  OF  GRACE,  not  allowed,  85. 
DEFENCE,    distinction   between   absolute    and    personal. 

Introduction. 
DEFENCES,  when  instrument  subject  to,  58. 
DELAY,  in  presentment  for  payment,  excused  when,  81. 

in  giving  notice  of  dishonor,  excused  when,  113. 

in  presenting  check,  effect  of,  186. 


NEGOTIABLE  INSTRUMENTS        285 

DELIVERY,  meaning  of,  191. 

of  incomplete  instrument,  15. 

contract  incomplete  without,  16. 

when  presumed,  16. 

necessary  to  negotiation,  30. 

lack  of,  a  defence,  55. 
DEMAND,  when  instrument  payable  on,  1,  7. 

negotiation  of  demand  instrument  unreasonable  time 
after  issue,  53. 

when    presentment    of    demand    instrument    must    be 
made,  71. 
DETERMINABLE  FUTURE  TIME,  1. 

what  is,  4. 
DISCHARGE  OF  INSTRUMENT,  how  made,  119. 

payment  by  party  secondarily  liable  not  a,  121. 

of  one  of  set  of  bills,  183. 
DISCHARGE  OF  PARTY  secondarily  liable,  120. 
DISCHARGE    BEFORE    MATURITY,    a    personal    de- 
fence, 55 

(See  DRAWER,  INDORSER.) 
DISHONOR,  by  non-payment,  83. 

effect  of,  84. 

by  non-acceptance,  149. 

effect  of,  150,  151. 

(See  NOTICE  OF  DISHONOR.) 
DRAWEE,  must  be  named  or  indicated,  1. 

may  be  payee,  8. 

not  liable  unless  he  accepts,  127. 

bill  may  be  addressed  to  two  or  more,  but  not  in  alterna- 
tive or  succession,  128. 

and  drawer  same  person  or  drawee  ficticious  or  incap- 
able of  contracting,  130. 

time  allowed  to  accept,  136. 

retaining  or  destroying  bill  liable  as  acceptor,  137. 


286        NEGOTIABLE  IN  STRUMENTS 

DRAWER,  may  be  payee,  8. 

admissions  and  engagement  of,  61. 

and  drawee  same  person  or  drawee  fictitious  or  incap- 
able of  contracting,  130. 

may  negative  or  limit  liability,  61. 

existence,  capacity,  and  authority  admitted  by  acceptor, 
62. 

when  presentment  for  payment  necessary  to  charge,  70. 

when  charged  without,  79. 

when  liability  accrues,  84,  151. 

when  notice  of  dishonor  required  to  charge,  89. 

when  not  required,  112,  114. 

when  discharged  by  failure  to  negotiate  or  present  bill 
for  acceptance,  144. 

liability  upon  dishonor  by  non-acceptance,  151. 

when  protest  necessary  to  charge,  152. 

when  failure  to  present  check  discharges,  188. 

when  certification  of  check  discharges,  188. 

DURESS,  instrument  or  signature  obtained  by,  55. 

EQUITABLE  DEFENCE,  (See  DEFENCE.) 

EQUITIES,    (See  DEFENCES,  NOTICES   OF 
EQUITIES.) 

EXCHANGE,  provision  for,  2. 

EXHIBITION   OF  INSTRUMENT,  when  payment  de- 
manded, 74. 

FEAR,  instrument  or  signature  obtained  by,  55. 

FICTITIOUS  PERSON,  as  payee,  9. 
as  drawee,  130. 
presentment  dispensed  with  where  drawee  is,  82. 

FIGURES  IN  INSTRUMENT,  office  of;  discrepancy  be- 
tween figures  and  words,  17. 

FISCAL  OFFICER,  as  payee  or  indorsee,  42. 

FORCE,  instrument  or  signature  obtained  by,  55. 


NEGOTIABLE  INSTRUMENTS        287 

FOREIGN  BILL,  what  is,  129. 

FORGERY  OF  SIGNATURE,  effect  of,  23. 
estoppel  to  set  up,  23. 

FRAUD,  instrument  or  signature  obtained  by,  55. 
GENUINENESS,  warranty  of,  upon  negotiations,  65,  66. 
of  signature  of  drawer,  acceptor  admits,  62. 

GRACE,  no  days  of,  85. 
HOLDER,  meaning  of,  191. 

may  sue  in  own  name,  51. 

payment  to,  51. 

right  of,  upon  dishonor  by  non-acceptanc,  84. 

upon  dishonor  by  non-acceptance,  151. 

duty  of,  upon  dishonor  by  non-acceptance,  150. 

refusing  to  receive  payment  supra  protest,  effect  of,  176. 

HOLDER  FOR  VALUE,  who  is,  26,  27. 
HOLDER  IN  DUE  COURSE,  who  is,  52. 

of  instrument  payable  on  demand,  53. 

where  full  pa3mient  not  made  before  notice,  54. 

where  title  of  transferor  defective,  55. 

what  constitutes  notice,  56. 

has   title   free  from   defences,   and   may  recover   full 
amount,  57. 

rights  of  one  claiming  under,  58. 

when  burden  of  proof  on  holder,  59. 

rights  of  an  altered  instrument,  124. 

HOLDER  OF  OFFICE  FOR  TIME  BEING,  as  payee,  8. 

HOLIDAY,  when  day  for  act  falls  on,  194. 
instrument  due  on,  85. 

HONOR,  (See  ACCETANCE  FOR  HONOR,  PAYMENT 
FOR  HONOR.) 

ILLEGALITY,  a  defence,  55. 

IMPERSONATION,  effect  of,  42 


288        NEGOTIABLE  INSTRUMENTS 

INCOMPLETE  INSTRUMENT,  filling  blanks  in,  13,  14. 
not  delivered,  15. 
acceptance  of,  138. 

INDORSEMENT,  meaning  of,  191. 

in  blank  makes  instrument  payable  to  bearer,  9. 

by  infant  or  corporation,  22. 

necessary  to  negotiate  instrument  payable  to  order,  30. 

transfer  without,  effect  of,  49. 

after  transfer,  effect  of,  49. 

must  be  on  instrument  or  allonge,  31. 

signature  alone  sufficient,  31. 

must  be  of  entire  instrument  unless  paid  in  part,  32. 

effect  of  forged,  23. 

kinds  of,  33. 

special  and  blank,  34. 

how  blank  converted  into  special,  35. 

restrictive,  36. 

rights  of  restricted  indorsee,  37. 

qualified,  38. 

conditional,  39. 

negotiation  by  delivery  of  bearer  instrument  indorsed 

specially,  40. 
of  instrument  payable  to  two  or  more  not  partners,  41. 
by  cashier  or  fiscal  officer,  42. 
where  name  of  payee  or  indorsee  wrongly  designated 

or  mispelled,  43. 
in  representative  capacity,  44. 
presumption  as  to  date  of,  45. 
presumption  as  to  place  of,  46. 
striking  out  and  effect  of,  48. 

(See  WARRANTY.)' 

INDORSER,  when  person  deemed  such,  17,  63. 
irregular  or  anomalous,  64. 
liability  of  qualified,  65. 


NEGOTIABLE  INSTRUMENTS        289 

INDORSEE,  of  unqualified,  66. 

liability  where  instrument  negotiable  by  delivery,  67. 

order  of  liability,  evidence  as  to,  68. 

when  joint  and  several,  68. 

when  presentment  for  payment  necessary  to  charge,  70. 

when  not  necessary,  80. 

when  liability  accrues,  84,  151. 

when  notice  of  dishonor  required  to  charge,  89. 

when  not  required,  112,  115. 

how  discharged,  120. 

payment  by,  does  not  discharge  instrument,  121. 

when  discharged  by  failure  to  negotiate  or  present  bill 
for  acceptance,  144. 

when  protest  necessary  to  charge,  152. 

liability  for  indorsing  parts  of  bills  in  set,  180. 
INFANCY,  a  defence,  55. 
INFANT,  indorsement  by,  22. 
INLAND  BILL,  what  is,  129. 
INSANITY,  a  defence,  55. 

INSTALMENTS,  INSTRUMENT  PAYABLE  ON,  2. 
INSTRUMENT,  meaning  of,  191. 

INTEREST,  date  from  which  it  runs,  17. 
does  not  make  sum  uncertain,  2. 
default  in  payment  of  instalment,  2. 
ISSUE,  meaning  of,  191. 

JOINT  AND  SEVERAL  PARTIES,  two  or  more  signing 
"I  promise  to  pay,"  17. 

(SEE  INDORSER.) 
JOINT  DEBTORS,  presentment  to,  78. 
LAW  MERCHANT,  governs  cases  not  provided  for,  195. 
LIABILITY,  of  transferor  by  delivery  only,  65. 

(See  AGENT,  BROKER,  MAKER,  DRAWER, 
ACCEPTOR,  INDORSER.) 


290        NEGOTIABLE  INSTRUMENTS 

LIEN,  banker's,  supplementary  paragraphs. 
LIEN  HOLDER,  is  holder  for  value,  27. 
LIMITATIONS,  statute  of,  supplementary  paragraphs. 
MAIL,  notice  of  dishonor  by,  96,  103,  104,  105,  106. 
MAKER,  may  be  payee,  8. 

note  to  order  of,  not  complete  until  indorsed,  184. 

engagement  and  admissions  of,  60. 

presentment  for  payment  not  necessary  to  charge,  70. 
MARRIED  WOMAN,  liability  of,  on  note,  55. 
MATURITY,  instrument  payable  "on  or  before,"  4. 

time  of,  85. 
NAME,  signing  in  assumed  or  trade,  18. 
NEGOTIABILITY,   provisions   in   instrument  which  im- 
pair, 3,  4,  5. 

provisions  in  instrument  which  do  not  impair,  2,  3,  4,  5,  6. 
NEGOTIABLE,  what  is  meant  by, — Introduction. 
NEGOTIABLE  INSTRUMENT,  "instrument"  means,  191. 

formal  requisites  of,  1-9. 

continues  negotiable  until  restrictively  indorsed  or  dis- 
charged, 47. 

nature  of  contract  in, — Intrdduction. 
NEGOTIABLE  INSTRUMENTS  LAW,  title  190. 

takes  effect  when,  195,  198. 

history  of, — Introduction. 
NEGOTIATION,  how  made,  30. 

to  and  by  prior  party,  50. 

after  payment  by  party  secondarily  liable,  121. 

discharge    by    failure    to    present    for    acceptance    or 
negotiate,  144. 

of  parts  of  bill  in  set,  179. 

(See  DELIVERY,  INDORSEMENT.) 
NON-EXISTING  PERSON,  as  payee,  9. 
NOTARY  PUBLIC,  may  make  protest,  154. 


NEGOTIABLE  INSTRUMENTS        291 

NOTE,  meaning  of,  191. 

NOTICE  OF  DISHONOR,  to  whom  must  be  given,  89. 

by  whom  may  be  given,  90. 

given  by  agent,  91,  94. 

enures  to  whose  benefit,  92,  93. 

need  not  be  signed;  written  may  be  supplemented  by 
oral,  95. 

when  misdescription  does  not  vitiate,  95, 

may  be  written  or  oral;  terms  of;  may  be  delivered 
personally  or  by  mail,  96. 

may  be  given  to  party  or  agent,  97. 

when  party  deed,  98. 

to  partners,  99. 

to  joint  parties  not  partners,  100. 

where  party  bankrupt  or  an  insolvent,  101. 

when  may  be  given,  102. 

where  parties  reside  in  same  place,  103. 

where  parties  reside  in  different  places,  104. 

miscarriage  in  mail  does  not  invalidate,  105. 

when  deemed  deposited  in  post-office,  106. 

time  for  giving  to  prior  parties  after  receiving,  107. 

where  must  be  sent;  receipt  of,  within  time,  although 
missent,  108. 

waiver  of,  109,  110. 

waiver  of  protest  includes  what,  111. 

when  dispensed  with,  112,  114,  115. 

delay  excused  when,  113. 

when  need  not  be  given  to  drawer,  114. 

when  need  not  be  given  to  indorser,  115. 

of  non-payment  after  notice  of  non-acceptance,  116. 

subsequent  holder   in   due   course   not  prejudiced   by 
omission  of  notice  of  non-acceptance,  117. 
NOTICE  OF  EQUITIES,  what  constitutes,  56. 

before  full  payment  of  agreed  amount,  54. 


292        NEGOTIABLE  INSTRUMENTS 

NOTING  FOR  PROTEST,  155. 

OMISSIONS,  not  affecting  validity  and  negotiability,  6. 

construction  in  case  of,  17. 

(See  BLANKS.) 
OPTION,  to  pay  "on  or  before,"  4. 

to  require  something  in  lieu  of  money,  5. 
ORDER,  instruments  payable  to,  1,  8. 
OVERDUE  INSTRUMENT,  when  payable  on  demand,  7. 
PAROL  EVIDENCE  RULE,  nature  of,  55. 
PARTNERS,  presentment  to,  77,  145. 

notice  of  dishonor  to,  99. 
PAYEE,  who  may  be,  8. 

fictitious  or  non-existing  person,  9. 

not  name  of  any  person,  9. 

maker  admits  existence  and  capacity  of  payee  to  in- 
dorse, 60. 

so  do  drawer,  61. 

and  acceptor,  62. 
PAYMENT,  in  due  course,  88. 

discharge  by,  119,  120. 

of  bill  in  set,  182,  183. 
PAYMENT  FOR  HONOR,  who  may  make  and  for  whose 
honor,  171. 

how  made,  172,  173. 

preference  among  persons  offering,  174. 

rights  of  payer  for  honor,  175,  177. 

discharge  of  parties  by,  175. 

effect  of  holder  of  refusing  to  receive,  176. 
PERSON,  meaning  of,  191. 

fictitious  or  non-existing,  9,  130. 
PERSON  PRIMARILY  LIABLE,  meaning  of,  192. 

chargeable  without  presentment  for  payment,  70. 
PERSON  SECONDARILY  LIABLE,  meaning  of,  192. 

right  of  recourse  against,  84,  150,  151. 


NEGOTIABLE  INSTRUMENTS        293 

PERSONAL  DEFENCE  (See  DEFENCE). 

PLACE,  failure  to  specify  does  not  affect  negotiability,  6. 

of  indorsement,  presumption,  46. 

for  presentment  for  payment,  72,  73. 

for  presentment  for  acceptance,  143,  147. 

alteration  as  to,  is  material,  125. 

instrument  payable  at  special,  70. 
POST-DATED  INSTRUMENT,  not  invalid  because  post- 
dated, 12. 

when  title  passes,  12. 
POST-OFFICE,  what  constitutes  deposit  in,  106. 
PRE-EXISTING  DEBT,  constitutes  value,  25. 
PRESENTATION,  instrument  payable  on,  is  payable  on 

demand,  7. 
PRESENTMENT  FOR  ACCEPTANCE,  when  necessary, 
143. 

effect  of  failure  to  make  or  negotiate,  144. 

how  made,  145. 

on  what  days  may  be  made,  146. 

when  delay  excused,  147. 
PRESENTMENT  FOR  PAYMENT,  when  necessary,  70. 

of  instrument  payable  on  demand,  71. 

how  must  be  made. 

proper  place  for,  73. 

instrument  must  be  exhibited  and  delivered  up,  74. 

of  instrument  payable  at  bank,  75. 

where  principal  debtor  dead,  76. 

to  partners,  77. 

to  joint  parties  not  partners,  78. 

when  drawer  charged  without,  79. 

when  indorser  charged  without,  80. 

delay  excused  when,  81. 

dispensed  with  when,  82. 

of  instrument  due  on  Saturday,  Sunday  or  holiday,  85. 


294        NEGOTIABLE  INSTRUMENTS 

PRESENTMENT  FOR  PAYMENT,  time  for,  how  deter- 
mined, 85 

to  acceptor  for  honor,  168. 

when  check  must  be  presented ;  effect  of  delay,  186. 
PRINCIPAL,  not  liable  unless  signature  on  instrument,  18. 

may  sign  by  agent,  19. 
'PRINTED  PROVISIONS,  give  way  to  written,  if  conflict, 

17. 
PROCURATION,  signature  by,  21. 
PROMISSORY  NOTE,  definition,  184. 

"note"  means,  191. 

when  holder  may  treat  as  bill  or  note,  17,  130. 

to  nlaker's  order,  not  complete  without  indorsement,  184. 
PROTEST,  waiver  of,  includes  what.  111. 

when  may  be  made,  118. 

when  must  be  made,  118,  152. 

how  made,  153. 

by  whom  made,  154. 

when  to  be  made,  155. 

where,  156. 

for  non-acceptance  and  non-payment,   157. 

for  better  security,  158. 

when  dispensed  with,  159. 

of  lost,  destroyed,  or  wrongly  detained  bill,  160. 

of  bill  accepted  for  honor,  167,  170. 
REASONABLE  TIME,  how  determined,  193. 

where  instrument  payable  on  demand,  53. 

bill  payable  on  demand,  71. 
REFEREE  IN  CASE  OF  NEED,  definition,  131. 

protest  of  bill  having,  167, 
RE-ISSUE  OF  INSTRUMENT,  50,  121. 
RE-NEGOTIATION,  (See  Re-issue.) 
RENUNCIATION,  how  made,  effect  of,  112. 
REPEAL  OF  LAWS,  197. 


NEGOTIABLE  INSTRUMENTS        295 

SATURDAY,  instrument  due  on,  85. 

SEAL,  does  not  impair  negotiability,  6. 

SECURITIES,  negotiation  of  public  or  corporation,  65. 

SET  OFF,  as  a  defence,  55. 

SIGHT,  instrument  payable  at,  payable  on  demand,  7. 

SIGNATURE,  necessary  to  liability,  18. 

in  trade  or  assumed  name,  18. 

by  agent,  19. 

with  qualifying  or  descriptive  words,  20. 

by  "procuration,"  21. 

forged,  23. 

acceptor  admits  genuineness  of  drawer's,  62. 

STATUTE    OR    LIMITATIONS,    supplementary    para- 
graphs. 

SUM  CERTAIN,  what  is,  2. 

SUNDAY,  when  day  for  act  falls  on,  194. 

instrument  due  on,  85. 
SUNDAY  LAW,  a  defence,  55. 

TENDER  OF  PAYMENT,  when  having  funds  at  special 
place  is,  70. 
as  discharge  of  party,  120. 

TERMS  OF  INSTRUMENT,  what  sufficient,  10. 

TIME,  of  maturity,  85. 

of  negotiation,  45. 

when  act  takes  effect,  195,  198. 

TITLE,  of  Act,  190. 

of  person  negotiating,  when  defective,  55. 
of  holder  in  due  course,  57. 
through  holder  in  due  course,  58. 
burden  of  proof,  59. 
notice  of  defect  in,  54,  56. 
holders  lack  of  defence,  55. 


296        NEGOTIABLE  INSTRUMENTS 

TRANSFER,  without  indorsement,  effect  of,  49,  65. 

(See  INDORSER.) 
UNCONDITIONAL,  order  or  promise,  what  is,  3. 
USAGE,  in  determining  reasonable  or  unreasonable  time, 

193. 
VALUE,  meaning  of,  191. 

what  constitutes;  antecedent  or  pre-existing  debt,  25. 
who  holder  for,  26,  27, 
accommodation  party  receives  no,  29. 
need  not  be  specified  in  instrument,  6. 
(See  CONSIDERATION.) 
WAIVER,  of  benefit  of  law  does  not  impair  negotiability,  5. 
of  presentment  for  payment,  82. 
of  notice  of  dishonor,  109,  110. 
of  protest.  111. 
WARANTY,    upon   negotiation   by   delivery   or   qualified 
indorsement,  65. 
by  qualified  indorsement,  66. 
upon  sale  of  public  or  corporation  securities,  65. 
"WITHOUT  RECOURSE,"  effect  of  indorsement,  38. 
"WRITTEN,"    includes    printed    and    "writing"    includes 

print,  191. 
WRITTEN  PROVISIONS,  prevail  over  printed,  if  conflict, 
17. 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 

THE  UNIVERSITY  LIBRARY 

This  book  is  DUE  on  the  last  date  stamped  below 


MAY  Z  6  1950 
mi  9  1951 


L". '  ..  r  '^m'W 


Form  1,-9 
i'um-l,'42(8r.lii) 


UNIVERSITY  OF  CALIFORNIA 

AT 

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LIBRARY 


HP 

1259     Willlston  - 
W67n     Negotiable 
i.nstrviinents 


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HP 

1259 

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